<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1995
________________
Commission file number 1-5704
________
Aetna Life and Casualty Company
___________________________________________________________________________
(Exact name of registrant as specified in its charter)
Connecticut 06-0843808
___________________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
151 Farmington Avenue, Hartford, Connecticut 06156
___________________________________________________________________________
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (203) 273-0123
______________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No _____
_____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Shares Outstanding
Title of Class at March 31, 1995
________________ __________________
Common Capital Stock 112,759,811
without par value
<PAGE> 2
TABLE OF CONTENTS
_________________
Page
____
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Shareholders'
Equity 6
Consolidated Statements of Cash Flows 7
Condensed Notes to Financial Statements 8
Independent Auditors' Review Report 19
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 45
Item 5. Other Information. 45
Item 6. Exhibits and Reports on Form 8-K. 47
Signatures 48
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
3 Months Ended
March 31,
______________________________
(Millions, except share and per share data) 1995 1994
____ ____
<S> <C> <C>
Revenue:
Premiums............................................. $ 2,929.0 $ 2,742.3
Net investment income................................ 1,085.9 1,126.5
Fees and other income................................ 476.0 460.6
Net realized capital losses.......................... (6.4) (5.9)
____________ ____________
Total revenue.................................... 4,484.5 4,323.5
____________ ____________
Benefits and expenses:
Current and future benefits.......................... 3,122.4 3,117.6
Operating expenses................................... 935.0 957.5
Amortization of deferred policy acquisition costs.... 187.2 192.0
____________ ____________
Total benefits and expenses...................... 4,244.6 4,267.1
____________ ____________
Income before income taxes............................. 239.9 56.4
Federal and foreign income taxes (benefits):
Current.............................................. (19.2) 2.3
Deferred............................................. 98.3 8.4
____________ ____________
Total federal and foreign income taxes........... 79.1 10.7
____________ ____________
Net income....................................... $ 160.8 $ 45.7
____________ ____________
____________ ____________
Results per common share:
Net income............................................. $ 1.42 $ .40
____________ ____________
____________ ____________
Dividends declared..................................... $ .69 $ .69
____________ ____________
____________ ____________
Weighted average common shares outstanding............. 112,949,522 113,129,560
____________ ____________
____________ ____________
<FN>
See Condensed Notes to Financial Statements.
</TABLE>
<PAGE> 4
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
(Millions) 1995 1994
_____________ ____________
<S> <C> <C>
Assets:
Investments:
Debt securities:
Held for investment, at amortized
cost (fair value $1,884.9 and
$1,991.2)....................... $ 1,871.9 $ 2,000.8
Available for sale, at fair value
(amortized cost $37,495.5 and
$36,984.2)...................... 36,715.8 35,110.7
Equity securities, at fair value
(cost $1,135.8 and $1,326.9)....... 1,489.7 1,655.6
Short-term investments.............. 434.0 450.4
Mortgage loans...................... 11,321.3 11,843.6
Real estate......................... 1,545.7 1,545.7
Policy loans........................ 558.8 533.8
Other............................... 1,099.4 1,152.7
_________ __________
Total investments............... 55,036.6 54,293.3
Cash and cash equivalents............. 3,144.0 2,953.6
Reinsurance recoverables and
receivables.......................... 5,019.1 5,011.0
Accrued investment income............. 737.7 777.2
Premiums due and other receivables.... 1,968.5 1,722.9
Federal and foreign income taxes:
Current............................. 68.1 18.3
Deferred............................ 1,248.2 1,266.7
Deferred policy acquisition costs..... 2,054.4 2,014.7
Other assets.......................... 2,041.0 1,992.2
Separate Accounts assets.............. 25,152.8 24,122.6
__________ __________
Total assets.................... $ 96,470.4 $ 94,172.5
__________ __________
__________ __________
<FN>
See Condensed Notes to Financial Statements.
</TABLE>
<PAGE> 5
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
March 31, December 31,
(Millions, except share and per share data) 1995 1994
_____________ ____________
<S> <C> <C>
Liabilities:
Future policy benefits........................ $ 17,471.6 $ 17,979.2
Unpaid claims and claim expenses.............. 17,501.9 17,478.3
Unearned premiums............................. 1,659.0 1,604.9
Policyholders' funds left with the company.... 23,561.4 23,223.1
__________ __________
Total insurance reserve liabilities....... 60,193.9 60,285.5
Dividends payable to shareholders............. 77.8 77.7
Short-term debt............................... 106.7 23.9
Long-term debt................................ 1,113.7 1,114.7
Other liabilities............................. 3,305.8 2,718.6
Participating policyholders' interests........ 154.8 170.5
Separate Accounts liabilities................. 25,019.4 24,003.6
__________ __________
Total liabilities......................... 89,972.1 88,394.5
__________ __________
Minority interest in preferred
securities of subsidiary..................... 275.0 275.0
__________ __________
Shareholders' Equity:
Class A Voting Preferred Stock (no par
value; 10,000,000 shares authorized;
no shares issued or outstanding)............. - -
Class B Voting Preferred Stock (no par
value; 15,000,000 shares authorized;
no shares issued or outstanding)............. - -
Class C Non-Voting Preferred Stock (no
par value; 15,000,000 shares authorized;
no shares issued or outstanding)............. - -
Common Capital Stock (no par value;
250,000,000 shares authorized;
114,939,275 issued, and 112,759,811
and 112,657,758 outstanding)................. 1,418.1 1,419.2
Net unrealized capital losses................. (438.2) (1,071.5)
Retained earnings............................. 5,342.6 5,259.6
Treasury stock, at cost 2,179,464 and
2,281,517 shares)............................ (99.2) (104.3)
__________ __________
Total shareholders' equity................ 6,223.3 5,503.0
__________ __________
Total liabilities and
shareholders' equity..................... $ 96,470.4 $ 94,172.5
__________ __________
__________ __________
Shareholders' equity per common share......... $ 55.19 $ 48.85
__________ __________
__________ __________
<FN>
See Condensed Notes to Financial Statements.
</TABLE>
<PAGE> 6
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Millions, except share data)
Net
Common Unrealized
Capital Capital Retained Treasury
Three Months Ended March 31, 1995 Total Stock Gains (Losses) Earnings Stock
__________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1994 $5,503.0 $1,419.2 $(1,071.5) $5,259.6 $ (104.3)
__________________________________________________________________________________________________________
Net income............................ 160.8 160.8
Net change in unrealized capital gains
and losses.......................... 633.3 633.3
Common stock issued for benefit plans
102,053 shares)..................... 5.1 5.1
Loss on issuance of treasury stock.... (1.1) (1.1)
Common stock dividends declared....... (77.8) (77.8)
__________________________________________________________________
Balances at March 31, 1995 $6,223.3 $1,418.1 $ (438.2) $5,342.6 $ (99.2)
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
Three Months Ended March 31, 1994
__________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1993 $7,043.1 $1,422.0 $ 648.2 $5,103.3 $ (130.4)
__________________________________________________________________________________________________________
Net income............................ 45.7 45.7
Net change in unrealized capital gains
and losses.......................... (588.7) (588.7)
Common stock issued for benefit plans
(335,477 shares).................... 18.1 18.1
Loss on issuance of treasury stock.... (2.0) (2.0)
Common stock dividends declared....... (77.9) (77.9)
____________________________________________________________________
Balances at March 31, 1994 $6,438.3 $1,420.0 $ 59.5 $5,071.1 $ (112.3)
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
<FN>
See Condensed Notes to Financial Statements.
</TABLE>
<PAGE> 7
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
3 Months Ended
March 31,
________________________
(Millions) 1995 1994
____ ____
<S> <C> <C>
Cash Flows from Operating Activities:
Net income....................................................... $ 160.8 $ 45.7
Adjustments to reconcile net income to net
cash used for operating activities:
Decrease in accrued investment income.......................... 39.8 36.8
(Increase) decrease in premiums due and other receivables...... (232.9) 98.3
Decrease (increase) in reinsurance recoverables and receivables .7 (61.3)
Increase in deferred policy acquisition costs.................. (21.8) (36.1)
Depreciation and amortization.................................. 46.9 46.9
Decrease in federal and foreign income taxes................... (39.1) (177.6)
Net increase (decrease) in other assets and other liabilities.. 130.5 (524.6)
Decrease in insurance reserve liabilities...................... (18.3) (583.8)
Net sales of debt trading securities........................... - 52.3
Increase in minority interest.................................. (24.0) (13.5)
Net realized capital losses.................................... 6.4 5.9
Amortization of net investment discount........................ (23.8) (27.7)
Other, net..................................................... (26.5) 16.1
_________ _________
Net cash used for operating activities....................... (1.3) (1,122.6)
_________ _________
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale............................. 3,089.9 6,945.0
Debt securities held for investment............................ - 5.6
Equity securities.............................................. 376.2 270.7
Mortgage loans................................................. 4.3 36.4
Real estate.................................................... 41.8 99.4
Short-term investments......................................... 14,515.4 15,972.4
Investment repayments of:
Debt securities available for sale............................. 566.2 1,285.4
Debt securities held for investment............................ 128.5 214.4
Mortgage loans................................................. 552.2 525.7
Cost of investments in:
Debt securities available for sale............................. (4,151.7) (7,649.5)
Debt securities held for investment............................ (8.2) (.1)
Equity securities.............................................. (143.0) (316.5)
Mortgage loans................................................. (45.9) (91.3)
Real estate.................................................... (41.0) (10.7)
Short-term investments......................................... (14,507.6) (15,862.2)
Increase in property, plant & equipment........................... (37.4) (25.9)
Net (increase) decrease in Separate Accounts...................... (14.5) 3.7
Other, net........................................................ 355.3 (2.6)
_________ _________
Net cash provided by investing activities....................... 680.5 1,399.9
_________ _________
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts........... 209.6 985.7
Withdrawals of investment contracts............................... (706.2) (1,257.1)
Issuance of long-term debt........................................ - 68.2
Stock issued under benefit plans.................................. 4.0 16.1
Repayment of long-term debt....................................... (1.5) (91.3)
Net increase in short-term debt................................... 83.0 64.6
Dividends paid to shareholders.................................... (77.6) (77.9)
_________ _________
Net cash used for financing activities.......................... (488.7) (291.7)
_________ _________
Effect of exchange rate changes on cash and cash
equivalents....................................................... (.1) (2.4)
_________ _________
Net increase (decrease) in cash and cash equivalents................. 190.4 (16.8)
Cash and cash equivalents, beginning of period....................... 2,953.6 1,557.8
_________ _________
Cash and cash equivalents, end of period............................. $ 3,144.0 $ 1,541.0
_________ _________
_________ _________
Supplemental Cash Flow Information:
Interest paid..................................................... $ 42.8 $ 35.9
_________ _________
_________ _________
Income taxes paid (received)...................................... $ 6.6 $ (71.1)
_________ _________
_________ _________
<FN>
See Condensed Notes to Financial Statements.
</TABLE>
<PAGE> 8
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(1) Basis of Presentation
The consolidated financial statements include Aetna Life and
Casualty Company and its majority-owned subsidiaries
(collectively, the "company"). Less than majority-owned entities
in which the company has at least a 20% interest are reported on
the equity basis. These consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles and are unaudited. Certain reclassifications have been
made to 1994 financial information to conform to 1995
presentation. These interim statements necessarily rely heavily
on estimates, including assumptions as to annualized tax rates.
In the opinion of management, all adjustments necessary for a fair
statement of results for the interim periods have been made. All
such adjustments are of a normal recurring nature.
(2) Future Application of Accounting Standards
In March 1995, the Financial Accounting Standards Board issued
Financial Accounting Standard ("FAS") No. 121, Accounting for
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
This statement requires write down to fair value when long-lived
assets to be held and used are impaired. The statement also
requires long-lived assets to be disposed of (e.g., real estate
held for sale) to be carried at the lower of cost or fair value
less cost to sell and does not allow such assets to be
depreciated. This statement will be effective for 1996 financial
statements, although earlier adoption is permissible. The company
has not yet determined the timing of adoption of this statement,
however the impact is not expected to be material.
(3) Insurance Liabilities
Workers' compensation life table indemnity reserves are discounted
at 5% for voluntary business and 3.5% for involuntary business,
with mortality assumptions that reflect current company and
industry experience. Workers' compensation life table indemnity
reserves totaled $725 million and $768 million at March 31, 1995
and December 31, 1994, respectively, which were 21% and 22%,
respectively, of the total workers' compensation reserves for
unpaid claims and claim adjustment expenses. Certain other
property-casualty reserves with fixed and determinable payment
patterns have been discounted at risk free rates. The aggregate
amount of such discount was approximately $21 million at March 31,
1995.
(4) Discontinued Products
Results of discontinued fully guaranteed large case pension
products (guaranteed investment contracts ("GICs") and single-
premium annuities ("SPAs")) for the three months ended March 31,
1995 and 1994 were charged to the reserve for anticipated future
losses and did not affect the company's results of operations.
<PAGE> 9
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(4) Discontinued Products (Continued)
Future losses (including capital losses) for each product will be
charged to the respective reserve at the time such losses are
realized. Management believes the reserve for anticipated losses
at March 31, 1995 is adequate to provide for future losses
associated with the guaranteed product liabilities. To the extent
that actual future losses differ from anticipated future losses,
the company's results of operations would be affected. (Please
refer to the company's 1994 Annual Report to Shareholders for a
more complete discussion of the reserve for anticipated future
losses on discontinued products.)
Results of discontinued products were as follows (pretax, in
millions):
<TABLE>
<CAPTION>
Charged to
Guaranteed Single- Reserve for
Investment Premium Future
Three months ended March 31, 1995 Contracts Annuities Total Losses Net*
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net investment income $ 132.3 $ 110.1 $ 242.4 $ - $ 242.4
Net realized capital gains (losses) (18.5) 8.0 (10.5) 10.5 -
Interest earned on receivable
from continuing business 5.1 7.6 12.7 - 12.7
Other income 2.5 3.0 5.5 - 5.5
_____________________________________________________________
Total revenue 121.4 128.7 250.1 10.5 260.6
_____________________________________________________________
Current and future benefits 155.2 114.4 269.6 (10.2) 259.4
Operating expenses (.3) 1.5 1.2 - 1.2
_____________________________________________________________
Total benefits and expenses 154.9 115.9 270.8 (10.2) 260.6
_____________________________________________________________
Results of discontinued products $ (33.5) $ 12.8 $ (20.7) $ 20.7 $ -
_____________________________________________________________________________________________________
_____________________________________________________________
Charged to
Guaranteed Single- Reserve for
Investment Premium Future
Three months ended March 31, 1994 Contracts Annuities Total Losses Net*
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Premiums $ - $ 39.2 $ 39.2 $ - $ 39.2
Net investment income 171.0 108.9 279.9 - 279.9
Net realized capital losses (25.5) (15.5) (41.0) 41.0 -
Interest earned on receivable
from continuing business 4.7 6.9 11.6 - 11.6
Other income 2.9 2.8 5.7 - 5.7
_____________________________________________________________
Total revenue 153.1 142.3 295.4 41.0 336.4
_____________________________________________________________
Current and future benefits 202.6 151.3 353.9 (20.6) 333.3
Operating expenses 1.9 1.2 3.1 - 3.1
_____________________________________________________________
Total benefits and expenses 204.5 152.5 357.0 (20.6) 336.4
_____________________________________________________________
Results of discontinued products $ (51.4) $ (10.2) $ (61.6) $ 61.6 $ -
_____________________________________________________________________________________________________
_____________________________________________________________
<FN>
* Amounts are reflected in the 1995 and 1994 Consolidated Statements of Income, except for interest of
$12.7 million and $11.6 million for the three months ended March 31, 1995 and 1994, respectively,
earned on the receivable from continuing business which is eliminated in consolidation.
</TABLE>
Deposits of $9.8 million and $134.2 million were received for the three
months ended March 31, 1995 and 1994, respectively, under pre-existing GIC
contracts. In accordance with FAS No. 97, such deposits are not included in
premiums or revenue.
<PAGE> 10
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(4) Discontinued Products (Continued)
Assets and liabilities of discontinued products were as follows
(in millions):
<TABLE>
<CAPTION>
March 31, 1995
_______________________________________
Guaranteed Single-
Investment Premium
Contracts Annuities Total
_______________________________________
<S> <C> <C> <C>
Debt securities available for sale $ 2,905.3 $ 3,276.5 $ 6,181.8
Mortgage loans 2,692.5 1,513.2 4,205.7
Real estate 547.7 171.7 719.4
Short-term and other investments 232.3 167.4 399.7
_______________________________________
Total investments 6,377.8 5,128.8 11,506.6
Current and deferred income taxes 263.7 128.7 392.4
Receivable from continuing
business 414.5 470.7 885.2
Other 10.6 2.1 12.7
________________________________________
Total assets $ 7,066.6 $ 5,730.3 $12,796.9
______________________________________________________________________________
______________________________________________________________________________
Future policy benefits $ - $ 5,007.7 $ 5,007.7
Policyholders' funds left with
the company 6,717.5 - 6,717.5
Reserve for future losses on
discontinued products 312.1 664.2 976.3
Other 37.0 58.4 95.4
________________________________________
Total liabilities $ 7,066.6 $ 5,730.3 $12,796.9
______________________________________________________________________________
______________________________________________________________________________
</TABLE>
Net unrealized capital gains as of March 31, 1995 on available for
sale debt securities are included above in other assets and are
not reflected in consolidated shareholders' equity. The reserve
for anticipated future losses on GICs is included in
policyholders' funds left with the company and the reserve for
anticipated future losses on SPAs is included in future policy
benefits on the Consolidated Balance Sheet.
At March 31, 1995 and December 31, 1994, estimated future after-
tax realized capital losses of approximately $122 million and $127
million ($187 million and $196 million, pretax), respectively,
attributable to mortgage loans and real estate supporting GICs,
and $44 million and $47 million ($67 million and $73 million,
pretax), respectively, attributable to mortgage loans and real
estate supporting SPAs were expected to be charged to the reserve
for future losses. Included in the ($18.5) million and $8.0
million of net realized capital (losses) gains (pretax) on GICs
and SPAs, respectively, for the three months ended March 31, 1995,
are (losses) gains from the sale of bonds of ($8.8) million and
$14.5 million, respectively. Included in the $25.5 million and
$15.5 million of net realized capital losses (pretax) on GICs and
SPAs, respectively, for the three months ended March 31, 1994, are
gains (losses) from the sale of bonds of $15.5 million and ($5.8)
million, respectively. As a result of selling bonds and realizing
losses and reinvesting the proceeds at higher interest rates, and
settling GIC liabilities at favorable pricing, the related
anticipated future losses associated with the negative interest
margin are expected to be reduced in the future.
<PAGE> 11
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(4) Discontinued Products (Continued)
The activity in the reserve for anticipated future losses on
discontinued products was as follows (pretax, in millions):
<TABLE>
<CAPTION>
3 Months Ended March 31, 1995
___________________________________
Guaranteed Single-
Investment Premium
Contracts Annuities Total
_________________________________________________________________________
<S> <C> <C> <C>
Reserve at beginning of period $ 345.6 $ 651.4 $ 997.0
Loss on discontinued products (33.5) 12.8 (20.7)
___________________________________
Reserve at end of period $ 312.1 $ 664.2 $ 976.3
_________________________________________________________________________
___________________________________
</TABLE>
At the time of discontinuance, a receivable from continuing
products was established for each discontinued product equivalent
to the net present value of the anticipated cash flow shortfalls.
The receivables will be funded from invested assets supporting
Large Case Pensions and accrue interest at the discount rates used
to calculate the loss on discontinuance until the receivable is
funded. The offsetting payable established in continuing products
will similarly accrue interest, generally offsetting the
investment income on the assets available to fund the shortfalls.
These amounts are eliminated in consolidation and are therefore
not reflected on the Consolidated Balance Sheet. At March 31,
1995 no funding had taken place. The activity in the receivable
from continuing business was as follows (pretax, in millions):
<TABLE>
<CAPTION>
3 Months Ended March 31, 1995
___________________________________
Guaranteed Single-
Investment Premium
Contracts Annuities Total
____________________________________________________________________________
<S> <C> <C> <C>
Receivable at beginning of period $ 409.4 $ 463.1 $ 872.5
Interest earned 5.1 7.6 12.7
___________________________________
Receivable at end of period $ 414.5 $ 470.7 $ 885.2
____________________________________________________________________________
___________________________________
</TABLE>
Pursuant to a segmentation plan approved in 1983 by the New York
Insurance Department, the combined assets supporting discontinued
products were segregated coincident with the receipt of premiums
and deposits on the discontinued products. Assets of the
discontinued products were distinguished physically, operationally
and for financial reporting purposes, from the remaining assets of
the company.
Management believes the timing and amount of cash flows with
respect to the discontinued products have been estimated with
reasonable accuracy, and the financial statements reflect
management's best estimate of the most likely cash flows that will
occur. However, future periods may include a charge or benefit
equal to the present value of the differences, if any, between
future projected cash flows and current estimates.
<PAGE> 12
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(5) Investments
Net investment income includes amounts allocable to experience
rated contractholders of $361 million for both the three months
ended March 31, 1995 and 1994. Interest credited to
contractholders is included in current and future benefits.
Net realized capital losses allocable to experience rated
contractholders of $35 million and $52 million for the three
months ended March 31, 1995 and 1994, respectively, were deducted
from net realized capital losses reflected on the Consolidated
Statements of Income, and an offsetting amount is reflected on the
Consolidated Balance Sheets in policyholders' funds left with the
company.
As of January 1, 1995, the company adopted FAS No. 114, Accounting
by Creditors for Impairment of a Loan and FAS No. 118, Accounting
by Creditors for Impairment of a Loan - Income Recognition and
Disclosures. In accordance with these standards, a loan is
considered impaired when it is probable that the company will be
unable to collect amounts due according to the contractual terms
of the loan agreement. When the company determines that a loan is
impaired, a specific impairment reserve is established for the
difference between the recorded investment (i.e., cost less
valuation reserves) in the mortgage loan and the fair value of the
collateral. General reserves are established for losses management
believes are likely to arise from the overall portfolio but cannot
be attributed to specific loans. Prior to the adoption of FAS
Nos. 114 and 118, the company included the impairment provision
for potential problem loans (other than those allocable to
experience rated products) which management believed were likely
to become classified as problem or restructured in the next 12
months or so in the general reserve.
At March 31, 1995, the total recorded investment in loans that are
considered to be impaired (which include problem loans,
restructured loans and potential problem loans) under FAS No. 114
and related specific reserves are presented in the table below.
Included in the total recorded investment are impaired loans of
$444 million for which no specific reserves are considered
necessary.
<TABLE>
<CAPTION>
(Millions) Total
Recorded Specific
Investment Reserves
_________________________________________________________________________
<S> <C> <C>
Supporting discontinued products $ 1,039.4 $ 287.4
Supporting experience rated products 715.8 224.4
Supporting remaining products 731.6 191.0
___________________________
Total Impaired Loans $ 2,486.8 $ 702.8
_________________________________________________________________________
___________________________
</TABLE>
<PAGE> 13
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(5) Investments (Continued)
The activity in the specific and general reserves as of March 31,
1995 is summarized below:
<TABLE>
<CAPTION>
General
Reserve
Allocated to Charged Balance
Balance at Experience Balance at to net Charged at
December 31, 1994 Rated December 31, 1994, realized to other Principal March 31,
(Millions) as reported Products (1) as adjusted loss accounts Write-offs 1995
_________________ ____________ __________________ ________ ________ __________ _________
<S> <C> <C> <C> <C> <C> <C> <C>
Supporting
discontinued
products $ 372.1 $ - $ 372.1 $ - $ 18.4(2)$ - $ 390.5
Supporting
experienced
rated
products 156.1 208.5 364.6 - 7.3(2) (16.4) 355.5
Supporting
remaining
products 255.9 - 255.9 4.4 - (2.7) 257.6
_____________________________________________________________________________________________
Total $ 784.1 $ 208.5 $ 992.6 $ 4.4 $ 25.7 $ (19.1) $ 1,003.6
__________________________________________________________________________________________________________
_____________________________________________________________________________________________
Specific
Reserves $ 434.1 $ - $ 434.1 $ 0.6 $ 287.2(3)$ (19.1) $ 702.8
General
Reserve 350.0 208.5 558.5 3.8 (261.5)(3) - 300.8
_____________________________________________________________________________________________
Total $ 784.1 $ 208.5 $ 992.6 $ 4.4 $ 25.7 $ (19.1) $ 1,003.6
__________________________________________________________________________________________________________
_____________________________________________________________________________________________
<FN>
(1) The general reserve at December 31, 1994 excluded reserves of approximately
$208.5 million related to experience rated products.
(2) Reflects additions to reserves related to assets supporting experience rated
products and discontinued products which do not affect the company's results
of operations.
(3) $261.5 million of general reserve related to performing loans at December 31,
1994 were reclassified to specific reserves at March 31, 1995.
</TABLE>
<PAGE> 14
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(5) Investments (Continued)
The company accrues interest income on impaired loans to the
extent it is deemed collectible and the loan continues to perform
under its original or restructured contractual terms. Interest
income on problem loans is generally recognized on a cash basis.
Cash payments on loans in the process of foreclosure are generally
treated as a return of principal.
Income earned (pretax) and received on the average recorded
investment in impaired loans for the three months ended March 31,
1995, was as follows:
<TABLE>
<CAPTION>
Average
Impaired Income Income
(Millions) Loans Earned Received
________ ______ ________
<S> <C> <C> <C>
Supporting discontinued products $ 1,056.1 $ 18.4 $ 17.5
Supporting experience rated products 855.9 13.0 12.9
Supporting remaining products 628.2 8.3 8.8
_____________________________
Total $ 2,540.2 $ 39.7 $ 39.2
_______________________________________________________________________
_____________________________
</TABLE>
(6) Federal and Foreign Income Taxes
Net unrealized capital gains and losses are presented in
shareholders' equity net of deferred taxes. At March 31, 1995,
$238 million of net unrealized capital losses primarily on
available for sale debt and equity securities were reflected in
shareholders' equity without deferred tax benefits. For federal
income tax purposes, capital losses are deductible only against
capital gains in the year of sale or during the carryback and
carryforward periods (three and five years, respectively). Due to
the expected full utilization of capital gains in the carryback
period and the uncertainty of future capital gains, a valuation
allowance of $83 million related to the net unrealized capital
losses has been reflected in shareholder's equity at March 31,
1995. In addition, at March 31, 1995, $201 million of unrealized
capital losses related to experience rated contracts are not
reflected in shareholders' equity since such losses, if realized,
will be charged to contractholders. However, the potential loss
of tax benefits on such losses is the risk of the company and
therefore would adversely affect the company rather than the
contractholder. Accordingly, an additional valuation allowance of
$71 million has been reflected in shareholders' equity as of March
31, 1995. Any reversals of the valuation allowance are contingent
upon the recognition of future capital gains in the company's
federal income tax return or a change in circumstances which
causes the recognition of the benefits to become more likely than
not. Non-recognition of the deferred tax benefits on net
unrealized losses described above had no impact on net income for
the three months ended March 31, 1995, but has the potential to
adversely affect future results if such losses are realized.
Potential losses of tax benefits related to net unrealized losses
on assets supporting the discontinued products are not expected to
adversely affect the company's future results.
<PAGE> 15
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(7) Reinsurance
Ceded earned premiums were $.3 billion for both the three months
ended March 31, 1995 and 1994. Ceded current and future benefits
were $.3 billion and $.4 billion for the three months ended March
31, 1995 and 1994, respectively.
(8) Debt
The company has credit facilities aggregating $1 billion with a
group of worldwide banks. One $500 million facility terminates in
July 1995 and the other $500 million facility terminates in July
1999. Various interest rate options are available under each
facility and any borrowings mature on the expiration date of the
applicable credit commitment. The company pays facility fees
ranging from .08% to .375% per annum under the short-term credit
agreement and from .1% to .5% per annum under the medium-term
credit agreement, depending upon the company's long-term senior
unsecured debt rating. The commitments require the company to
maintain shareholders' equity, excluding net unrealized capital
gains and losses, of at least $5.0 billion. These facilities also
support the company's commercial paper borrowing program.
Pursuant to shelf registration statements declared effective by
the Securities and Exchange Commission ("SEC") the company may
offer and sell up to an additional $550 million of various types
of securities.
A subsidiary of the company may offer and sell up to an additional
$225 million of preferred securities under a shelf registration
statement declared effective by the SEC.
<PAGE> 16
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(9) Off-Balance-Sheet Financial Instruments
(including Derivative Financial Instruments)
The company engages in hedging activities to manage foreign
exchange and interest rate risk. Such hedging activities have
principally consisted of using off-balance-sheet instruments
including foreign exchange forward contracts, futures and forward
contracts, and interest rate swap agreements. (Please see General
Account Investments - Use of Derivatives and Other Investments on
pages 41 and 42 of the Management's Discussion and Analysis of
Financial Condition and Results of Operations and Note 18 of the
company's 1994 Annual Report to Shareholders for a description of
the company's hedging activities). The notional amounts, carrying
values and estimated fair values of the company's off-balance-
sheet financial instruments are as follows (in millions):
<TABLE>
<CAPTION>
Carrying
Value
Notional Asset Fair
March 31, 1995 Amount (Liability) Value
______________ ________ ___________ ________
<S> <C> <C> <C>
Foreign exchange forward contracts - sell:
Related to net investments in foreign
affiliates $ 458.7 $ (11.3) $ (12.9)
Related to investments in non-dollar
denominated assets 247.9 (5.8) (6.1)
Foreign exchange forward contracts - buy:
Related to net investments in foreign
affiliates 32.7 7.7 5.6
Related to investments in non-dollar
denominated assets 89.2 2.3 2.4
Futures contracts to purchase investments 87.0 (.4) .4
Futures contracts to sell investments 74.6 3.3 (3.3)
Forward contracts to purchase investments 152.6 - .1
Forward contracts to sell investments 54.6 - -
Interest rate swaps:
Unrecognized gains 569.4 - 21.6
Unrecognized losses 526.4 - (15.9)
Written covered call options 30.0 (.3) (.3)
Carrying
Value
Notional Asset Fair
December 31, 1994 Amount (Liability) Value
_________________ ________ ___________ ________
<S> <C> <C> <C>
Foreign exchange forward contracts - sell:
Related to net investments in foreign
affiliates $ 497.8 $ (2.5) $ (4.7)
Related to investments in non-dollar
denominated assets 266.9 (.8) (1.6)
Foreign exchange forward contracts - buy:
Related to net investments in foreign
affiliates 48.5 5.2 4.8
Related to investments in non-dollar
denominated assets 40.9 .1 .2
Futures contracts to purchase investments 122.5 (.1) .1
Forward contracts to purchase investments 5.6 - -
Interest rate swaps:
Unrecognized gains 429.4 - 20.7
Unrecognized losses 386.4 - (18.3)
</TABLE>
<PAGE> 17
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(10) Supplemental Cash Flow Information
Significant non-cash investing and financing activities include
acquisition of real estate through foreclosures (including in-
substance foreclosures) of mortgage loans amounting to $13 million
and $102 million for the three months ended March 31, 1995 and
1994, respectively.
(11) Earnings Per Share
Earnings per share are computed using net income divided by the
weighted average number of common shares outstanding, including
common share equivalents. There is not a significant difference
between primary and fully diluted earnings per share.
(12) Commitments and Contingent Liabilities
Environmental and Asbestos-Related Claims
Reserving for environmental and asbestos-related claims is subject
to significant uncertainties. Because of these significant
uncertainties, management is unable to make a reasonable estimate
as to the ultimate amount of losses or a reasonable range of
losses for all environmental and asbestos-related claims and
related litigation expenses. To the extent that such liabilities
are not reasonably estimable, no reserve has been provided.
However, reserves for these liabilities are evaluated by
management regularly, and, subject to the significant
uncertainties, adjustments have been and are expected to be made
to such reserves as developing loss patterns and other information
appear to warrant. Environmental and asbestos-related loss and
loss adjustment expense reserves, as reflected on the Consolidated
Balance Sheet, were as follows (before reinsurance and net of
discount on environmental settlements, in millions):
<TABLE>
<CAPTION>
March 31,
1995
__________________________________________________
<S> <C>
Environmental Liability $ 497
Asbestos Bodily Injury 298
Asbestos Property Damage 29
______
Total Environmental and
Asbestos-Related Reserves $ 824
_______________________________________________
______
</TABLE>
<PAGE> 18
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(13) Litigation
Beginning in 1988, the attorneys general of 20 states each filed
separate antitrust suits against The Aetna Casualty and Surety
Company ("Aetna") and over 30 other insurers, reinsurers, trade
associations and brokers. A full description of this litigation
is contained in Note 19 of Notes to Consolidated Financial
Statements in the company's 1994 Annual Report to Shareholders.
On March 29, 1995, the United States District Court for the
Northern District of California approved the plaintiffs'
settlement of this litigation with all defendants, including
Aetna. Aetna's share of the settlement is not material.
The company is continuously involved in numerous other lawsuits
arising, for the most part, in the ordinary course of its business
operations either as a liability insurer defending third-party
claims brought against its insureds or as an insurer defending
coverage claims brought against itself, including lawsuits related
to issues of policy coverage and judicial interpretation. One
such area of coverage litigation involves legal liability for
environmental and asbestos-related claims. These lawsuits and
other factors make reserving for these claims subject to
significant uncertainties.
While the ultimate outcome of such litigation cannot be determined
at this time, such litigation (other than that related to
environmental and asbestos-related claims, which is subject to
significant uncertainties), net of reserves established therefor
and giving effect to reinsurance probable of recovery, is not
expected to result in judgments for amounts material to the
financial condition of the company, although it may adversely
affect results of operations in future periods. The company is
expected to be affected adversely in the future by losses for
environmental and asbestos-related claims and related litigation
expenses and such effect could be material to the company's future
results, liquidity and/or capital resources.
<PAGE> 19
Independent Auditors' Review Report
The Board of Directors
Aetna Life and Casualty Company:
We have reviewed the accompanying condensed consolidated balance
sheet of Aetna Life and Casualty Company and Subsidiaries as of
March 31, 1995, and the related condensed consolidated statements
of income for the three-month periods ended March 31, 1995 and
1994, and the related condensed consolidated statements of
shareholders' equity and cash flows for the three-month periods
ended March 31, 1995 and 1994. These condensed consolidated
financial statements are the responsibility of the company's
management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying condensed
consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Aetna Life
and Casualty Company and Subsidiaries as of December 31, 1994, and
the related consolidated statements of income, shareholders'
equity, and cash flows for the year then ended (not presented
herein); and in our report dated February 7, 1995, we expressed an
unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1994, is
fairly presented, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/s/ KPMG PEAT MARWICK LLP
Hartford, Connecticut
April 27, 1995
<PAGE> 20
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Consolidated Results of Operations
__________________________________
<TABLE>
<CAPTION>
Operating Summary
(Millions, except per share data) Three Months Ended March 31
___________________________________
1995 1994 % Change
____ ____ ________
<S> <C> <C> <C>
Premiums............................. $ 2,929.0 $ 2,742.3 6.8%
Net investment income................ 1,085.9 1,126.5 (3.6)
Fees and other income................ 476.0 460.6 3.3
Net realized capital losses.......... (6.4) (5.9) (8.5)
_________ _________
Total revenue.................... 4,484.5 4,323.5 3.7
Current and future benefits.......... 3,122.4 3,117.6 .2
Operating expenses................... 935.0 957.5 (2.3)
Amortization of deferred policy
acquisition costs................... 187.2 192.0 (2.5)
_________ _________
Total benefits and expenses...... 4,244.6 4,267.1 (.5)
_________ _________
Income before income taxes........... 239.9 56.4 -
Income taxes......................... 79.1 10.7 -
_________ _________
Net income....................... $ 160.8 $ 45.7 -
_________ _________
_________ _________
Net realized capital losses,
net of tax (included above)......... $ (7.0) $ (7.5) 6.7
_________ _________
_________ _________
Net income per common share.......... $ 1.42 $ .40 -
_________ _________
_________ _________
</TABLE>
Overview
________
Net income was $161 million for the three months ended March 31,
1995 compared with $46 million for the same period a year ago.
Results for the three months ended March 31, 1995 included after-
tax catastrophe losses of $13 million. Results for the three
months ended March 31, 1994 included after-tax catastrophe losses
of $124 million, related primarily to the Los Angeles earthquake
and the severe winter weather.
Results in 1995 also reflected an overall reduction in operating
expenses, primarily due to actions taken by management in prior
years to lower costs. This overall reduction occurred even though
operating expenses increased in the health care business, as a
result of the company's increased investment in managed care, and
increased in the Aetna Life Insurance & Annuity segment.
<PAGE> 21
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Overview (Continued)
____________________
Net Realized Capital Gains and Losses
Net realized after-tax capital gains and losses included in net
income, allocable to experience rated pension contractholders, and
supporting discontinued products were as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended March 31
___________________________
1995 1994
____ ____
<S> <C> <C>
Net realized capital gains (losses)
from sales................................. $ (2.9) $ 15.2
Realized capital losses from additions to
reserves for mortgage loans and real estate (4.1) (22.2)
Realized capital losses from write-downs
of debt and equity securities.............. - (0.5)
_______ _______
Net realized capital losses from
continuing operations...................... $ (7.0) $ (7.5)
_______ _______
_______ _______
Net realized capital losses allocable to
experience rated pension contractholders
(excluded above)........................... $ (22.8) $ (33.9)
_______ _______
_______ _______
Net realized capital losses on assets
supporting discontinued products
(excluded above)........................... $ (6.8) $ (26.7)
_______ _______
_______ _______
</TABLE>
Net realized capital gains from sales in the first quarter of
1994, as presented above, include a $14 million gain resulting
from the sale of a portion of an unconsolidated subsidiary.
Strategic Outlook
The company continues to review its Property-Casualty and other
businesses and assess their potential for contribution to the
company's long-term strategic and financial objectives.
<PAGE> 22
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Aetna Health Plans
__________________
<TABLE>
<CAPTION>
Operating Summary
(Millions) Three Months Ended March 31
__________________________________
1995 1994 % Change
____ ____ ________
<S> <C> <C> <C>
Premiums............................ $ 1,494.7 $ 1,326.9 12.6%
Net investment income............... 84.7 84.2 .6
Fees and other income............... 307.5 298.2 3.1
Net realized capital losses......... (4.2) (18.8) 77.7
_________ _________
Total revenue.................... 1,882.7 1,690.5 11.4
Current and future benefits......... 1,273.3 1,109.1 14.8
Operating expenses.................. 485.0 451.7 7.4
Amortization of deferred policy
acquisition costs.................. 6.8 7.4 (8.1)
_________ _________
Total benefits and expenses...... 1,765.1 1,568.2 12.6
_________ _________
Income before income taxes.......... 117.6 122.3 (3.8)
Income taxes........................ 44.0 44.9 (2.0)
_________ _________
Net income.......................... $ 73.6 $ 77.4 (4.9)
_________ _________
_________ _________
Net realized capital losses,
net of tax (included above)........ $ (2.8) $ (12.0) 76.7
_________ _________
_________ _________
Self-funded benefit payments
administered for customers other
than Medicare...................... $ 3,208.0 $ 2,991.6 7.2
_________ _________
_________ _________
Benefit payments administered for
Medicare........................... $ 3,450.5 $ 3,249.7 6.2
_________ _________
_________ _________
</TABLE>
Aetna Health Plans' net income for the three months ended March
31, 1995 decreased by $4 million compared with the same period a
year ago. Excluding net realized capital losses, results for the
three months ended March 31, 1995 decreased $13 million from the
prior year.
Results decreased in the first quarter of 1995 primarily due to
increased operating expenses partially offset by an increase in
premiums and fees and other income. The growth in operating
expenses is primarily attributable to the migration of customers
from the traditional health care business to the more resource-
intensive managed care business, investments in managed care-
related systems and the development of primary care physician
practices. In addition, first quarter 1994 results included $8
million (after-tax) of non-recurring benefits from the settlement
of a lawsuit and the termination of an HMO management contract.
<PAGE> 23
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Aetna Health Plans (Continued)
______________________________
Premiums and fees and other income increased 11% in the first
quarter of 1995 compared with the same period in 1994, primarily
resulting from growth in covered members, modest price increases
and a movement toward higher revenue products, such as point-of-
service and health maintenance organizations.
The increase in current and future benefits primarily resulted
from growth of covered members in certain types of insured
products.
The number of members covered under health care arrangements was
15.7 million and 15.6 million at March 31, 1995 and December 31,
1994, respectively. The number of managed care members was 7.6
million and 7.0 million at March 31, 1995 and December 31, 1994,
respectively. Included in the number of members at March 31, 1995
and December 31, 1994 were approximately .7 million members
covered under a contract with the Civilian Health and Military
Program of the Uniformed Services ("Champus"). Champus has
awarded renewal of the contract to another provider effective
October 1, 1995, and the company has filed a protest with the
General Accounting Office concerning the process by which the
contract was awarded. Management believes that loss of the
contract, should it occur, would not have a material effect on the
results of the segment for 1995.
<PAGE> 24
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Large Case Pensions
___________________
<TABLE>
<CAPTION>
Operating Summary
(Millions) Three Months Ended March 31
__________________________________
1995 1994 % Change
____ ____ ________
<S> <C> <C> <C>
Premiums........................... $ 124.4 $ 56.9 118.6%
Net investment income.............. 468.2 505.0 (7.3)
Fees and other income.............. 35.1 32.1 9.3
Net realized capital losses........ (7.7) (9.5) 18.9
_________ _________
Total revenue................... 620.0 584.5 6.1
Current and future benefits........ 581.1 554.6 4.8
Operating expenses................. 20.6 22.8 (9.6)
_________ _________
Total benefits and expenses..... 601.7 577.4 4.2
_________ _________
Income before income taxes......... 18.3 7.1 157.7
Income taxes....................... 7.0 .5 -
_________ _________
Net income......................... $ 11.3 $ 6.6 71.2
_________ _________
_________ _________
Net realized capital losses,
net of tax (included above)...... $ (5.0) $ (6.0) 16.7
_________ _________
_________ _________
Deposits not included in premiums
above (a)........................ $ 427.0 $ 653.3 (34.6)
_________ _________
_________ _________
<FN>
(a) Under Financial Accounting Standard No. 97, certain deposits are
not included in premiums or revenue.
</TABLE>
Large Case Pensions' net income for the three months ended March
31, 1995 increased by $5 million compared with the same period a
year ago. Excluding net realized capital losses, results for the
three months ended March 31, 1995 increased $4 million from the
prior year.
Results for the three months ended March 31, 1995 primarily
reflected an increase in fees and other income, and a reduction in
operating expenses due to expense reduction measures.
The increase in premiums related to additional premiums from
existing contractholders and did not have a material effect on
results.
Assets under management were $46.1 billion and $50.1 billion, at
March 31, 1995 and 1994, respectively. Included in assets under
management are net unrealized capital losses of $170 million and
net unrealized capital gains of $22 million at March 31, 1995 and
1994, respectively.
<PAGE> 25
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Large Case Pensions (Continued)
_______________________________
Experience rated contractholder and participant withdrawals and
transfers were as follows (excluding contractholder transfers to
other company products) (in millions):
<TABLE>
<CAPTION>
Three Months Ended March 31
____________________________
1995 1994
____ ____
<S> <C> <C>
Scheduled contract maturities
and benefit payments: (1)......... $ 270.3 $ 240.3
________ ________
________ ________
Contractholder withdrawals other
than scheduled contract maturities
and benefit payments.............. $ 97.6 $ 159.7
________ ________
________ ________
Participant withdrawals............ $ 54.5 $ 61.7
________ ________
________ ________
<FN>
(1) Includes payments made upon contract maturity and other amounts
distributed in accordance with contract schedules.
</TABLE>
The company is exploring strategic partnership or similar
opportunities for its Large Case Pension investment management and
advisory business conducted through its Aeltus Investment
Management subsidiary, including disposition of the business.
Such business contributed $15 million and $4 million to Large Case
Pension's net income for the year ended December 31, 1994 and the
three months ended March 31, 1995, respectively.
Discontinued Products
Results of discontinued fully guaranteed large case pension
products (guaranteed investment contracts ("GICs") and single-
premium annuities ("SPAs")) for the three month periods ended
March 31, 1995 and 1994 were charged to the reserve for
anticipated future losses and did not affect the company's results
of operations. Future losses (including capital losses) for each
product will be charged to the respective reserve at the time such
losses are realized. Management believes the reserve for
anticipated losses at March 31, 1995 is adequate to provide for
future losses associated with the guaranteed product liabilities.
To the extent that actual future losses differ from anticipated
future losses, the company's results of operations would be
affected. (Please refer to the company's 1994 Annual Report to
Shareholders for a more complete discussion of the reserve for
anticipated future losses on discontinued products.)
At the time of discontinuance, a receivable from continuing
products was established for each discontinued product equivalent
to the net present value of the anticipated cash flow shortfalls.
The receivables will be funded from invested assets supporting
Large Case Pensions and accrue interest at the discount rates used
to calculate the loss on discontinuance until the receivable is
funded. The offsetting payable established in continuing products
will similarly accrue interest, generally offsetting the
investment income on the assets available to fund the shortfalls.
At March 31, 1995, the receivables from continuing operations were
$414 million and $471 million for GICs and SPAs, respectively, and
no funding had taken place.
<PAGE> 26
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Large Case Pensions (Continued)
_______________________________
Results of discontinued products were as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended March 31
________________________________
1995
________________________________
GICs SPAs Total
____ ____ _____
<S> <C> <C> <C>
Negative interest margin (a)............. $ (14.9) $ (2.8) $ (17.7)
Net realized capital gains (losses)...... (12.0) 5.2 (6.8)
Interest earned on receivable from
continuing operations.................. 3.3 5.0 8.3
Other, net............................... 1.1 1.6 2.7
________ ________ ________
Results of discontinued products,
after-tax.............................. $ (22.5) $ 9.0 $ (13.5)
________ ________ ________
________ ________ ________
Results of discontinued products,
pretax.................................. $ (33.5) $ 12.8 $ (20.7)
________ ________ ________
________ ________ ________
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31
________________________________
1994
________________________________
GICs SPAs Total
____ ____ _____
<S> <C> <C> <C>
Negative interest margin (a)............. $ (20.5) $ (2.1) $ (22.6)
Net realized capital losses.............. (16.6) (10.1) (26.7)
Interest earned on receivable from
continuing operations.................. 3.1 4.5 7.6
Other, net............................... 0.6 1.1 1.7
________ ________ ________
Results of discontinued products,
after-tax.............................. $ (33.4) (6.6) $ (40.0)
________ ________ ________
________ ________ ________
Results of discontinued products, pretax. $ (51.4) $ (10.2) $ (61.6)
________ ________ ________
________ ________ ________
<FN>
(a) Represents the amount by which interest credited to holders of fully
guaranteed large case pension contracts exceeds interest earned on
invested assets supporting such contracts.
</TABLE>
The activity in the reserve for anticipated future losses on
discontinued products was as follows (pretax, in millions):
<TABLE>
<CAPTION>
Three Months Ended March 31, 1995
_________________________________
GICs SPAs Total
____ ____ _____
<S> <C> <C> <C>
Reserve at December 31, 1994..... $ 345.6 $ 651.4 $ 997.0
Results of discontinued products.. (33.5) 12.8 (20.7)
________ ________ ________
Reserve at March 31, 1995........ $ 312.1 $ 664.2 $ 976.3
________ ________ ________
________ ________ ________
</TABLE>
<PAGE> 27
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Large Case Pensions (Continued)
_______________________________
The results of discontinued products for the three month period
ended March 31, 1995 included net realized capital losses of $12
million and net realized capital gains of $5 million (after-tax)
on GICs and SPAs, respectively, which included net losses of $6
million and gains of $9 million, respectively, from the sale of
bonds. The loss on discontinued products for the three month
period ended March 31, 1994 included $17 million and $10 million
of net realized capital losses (after-tax) on GICs and SPAs,
respectively, which included net gains of $10 million and losses
of $4 million, respectively, from the sale of bonds. As a result
of selling bonds and realizing losses and reinvesting the proceeds
at higher interest rates, and settling GIC liabilities at
favorable pricing, the related anticipated future losses
associated with the negative interest margin are expected to be
reduced in the future.
At March 31, 1995 and December 31, 1994, estimated future after-
tax capital losses of $122 million and $127 million ($187 million
and $196 million, pretax), respectively, attributable primarily to
mortgage loans and real estate supporting GICs, and $44 million
and $47 million ($67 million and $73 million, pretax),
respectively, attributable primarily to mortgage loans and real
estate supporting SPAs were expected to be charged to the reserve
for future losses.
Distributions on GICs and SPAs were as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended March 31
____________________________________
1995
____________________________________
GICs SPAs Total
____ ____ _____
<S> <C> <C> <C>
Scheduled contract maturities,
GIC settlements and benefit
payments (1)...................... $ 644.8 $ 133.7 $ 778.5
________ ________ ________
________ ________ ________
Participant directed withdrawals... $ 27.1 $ - $ 27.1
________ ________ ________
________ ________ ________
Three Months Ended March 31
____________________________________
1994
____________________________________
GICs SPAs Total
____ ____ _____
<S> <C> <C> <C>
Scheduled contract maturities
and benefit payments (1).......... $ 563.0 $ 131.6 $ 694.6
________ ________ ________
________ ________ ________
Participant directed withdrawals... $ 74.0 $ - $ 74.0
________ ________ ________
________ ________ ________
<FN>
(1) Includes payments made upon contract maturity, early settlement of GIC
liabilities and other amounts distributed in accordance with contract schedules.
</TABLE>
Cash required to meet the above payments was provided by earnings
on, sales of, and scheduled payments on, invested assets.
(Please see "General Account Investments" on page 33 for a
discussion of investments supporting discontinued products.)
<PAGE> 28
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Aetna Life Insurance & Annuity
______________________________
<TABLE>
<CAPTION>
Operating Summary
(Millions) Three Months Ended March 31
__________________________________
1995 1994 % Change
____ ____ ________
<S> <C> <C> <C>
Premiums............................ $ 42.4 $ 36.0 17.8%
Net investment income............... 245.5 240.4 2.1
Fees and other income............... 84.0 78.4 7.1
Net realized capital gains (losses). 3.0 (3.0) -
_________ _________
Total revenue.................... 374.9 351.8 6.6
Current and future benefits......... 229.1 219.5 4.4
Operating expenses.................. 70.1 59.5 17.8
Amortization of deferred policy
acquisition costs.................. 11.5 14.1 (18.4)
_________ _________
Total benefits and expenses...... 310.7 293.1 6.0
_________ _________
Income before income taxes.......... 64.2 58.7 9.4
Income taxes........................ 20.7 19.2 7.8
_________ _________
Net income.......................... $ 43.5 $ 39.5 10.1
_________ _________
_________ _________
Net realized capital gains (losses),
net of tax (included above)........ $ 1.9 $ (2.0) -
_________ _________
_________ _________
Deposits not included in premiums
above (a).......................... $ 921.1 $ 841.8 9.4
_________ _________
_________ _________
<FN>
(a) Under Financial Accounting Standard No. 97, certain deposits are
not included in premiums or revenue.
</TABLE>
Aetna Life Insurance & Annuity's net income for the three months
ended March 31, 1995 increased $4 million from the same period a
year ago. Excluding net realized capital gains and losses,
results for the three months ended March 31, 1995 remained level
with the same period a year ago.
Results in the first quarter of 1995 benefited from increased fees
assessed against policyholders and increased net investment income
related to the growth in assets under management offset by an
increase in operating expenses. The increase in operating
expenses primarily reflects continued business growth and costs
associated with the implementation of a new contract
administration system.
Assets under management were $21.2 billion and $18.7 billion, at
March 31, 1995 and 1994, respectively. Included in assets under
management are net unrealized capital losses of $70 million and
net unrealized capital gains of $220 million at March 31, 1995 and
1994, respectively.
<PAGE> 29
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Property-Casualty
_________________
<TABLE>
<CAPTION>
Operating Summary
(Millions) Three Months Ended March 31
__________________________________
1995 1994 % Change
____ ____ ________
<S> <C> <C> <C>
Premiums............................ $ 1,046.9 $ 1,117.9 (6.4)
Net investment income............... 215.9 216.6 (.3)
Fees and other income............... 22.6 29.8 (24.2)
Net realized capital gains.......... 6.8 23.7 (71.3)
_________ _________
Total revenue.................... 1,292.2 1,388.0 (6.9)
Current and future benefits......... 842.1 1,038.8 (18.9)
Operating expenses.................. 198.5 253.0 (21.5)
Amortization of deferred policy
acquisition costs.................. 155.1 158.9 (2.4)
_________ _________
Total benefits and expenses...... 1,195.7 1,450.7 (17.6)
_________ _________
Income (loss) before income taxes... 96.5 (62.7) -
Income tax (benefits) expenses...... 28.1 (36.5) -
_________ _________
Net income (loss)................... $ 68.4 $ (26.2) -
_________ _________
_________ _________
Net realized capital gains,
net of tax (included above)......... $ 3.6 $ 16.4 (78.0)
_________ _________
_________ _________
Statutory combined loss and
expense ratio...................... 111.1% 130.1% -
_________ _________
_________ _________
GAAP combined loss and expense ratio 112.7% 128.4% -
_________ _________
_________ _________
Catastrophe loss ratio
(included in combined ratios above) 1.9% 16.0% -
_________ _________
_________ _________
</TABLE>
Property-Casualty's results for the three months ended March 31,
1995 increased $95 million compared with the same period a year
ago. Excluding net realized capital gains, results for the three
months ended March 31, 1995 increased $107 million from the prior
year.
Catastrophe losses (after-tax) for the three months ended March
31, 1995 were $13 million compared with $124 million for the same
period a year ago. Catastrophe losses in the first quarter of
1994 included $120 million ($285 million pretax and before
reinsurance) from the Los Angeles earthquake and the severe winter
weather.
Results in 1995 benefited from a reduction in operating expenses,
primarily due to actions taken by management in prior years to
lower costs.
Premium revenue for the first quarter of 1995 was approximately 6
percent lower than in the same period a year ago, due primarily to
the transferring of additional risk through restructured and
expanded reinsurance programs, and reductions in residual market
business assumed as a result of exiting certain markets.
<PAGE> 30
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Property-Casualty (Continued)
_____________________________
Property-Casualty Reserves
For a full discussion of property-casualty reserves, including
environmental and asbestos-related reserves, please see the
company's 1994 Annual Report to Shareholders.
During the first quarter of 1995, $18 million (after-tax and net
of reinsurance and discounting, as discussed below) ($77 million
pretax, before reinsurance and net of discounting) was added to
environmental-related claims reserves compared to $21 million
(after-tax and net of reinsurance) ($60 million pretax and before
reinsurance) in the first quarter of 1994. These reserve
additions related to indemnity-related liabilities and litigation
expenses.
The company is involved in certain coverage dispute cases where
insureds have presented the company with particularly large claims
for coverage. The case described in the company's 1994 Annual
Report to Shareholders involving such an insured that was
scheduled to begin trial this year has been settled, and the
company has obtained a release from liability from the insured for
any and all current and future environmental sites/claims
involving the insured in exchange for fixed, scheduled cash
payments to be made over time. The settlement was recorded on a
discounted basis and had been substantially reserved for in prior
periods.
The company is in the process of reviewing its methodologies for
reserving environmental-related claims and reviewing additional
data obtained from an outside actuarial firm in an effort to
improve the company's ability to estimate all or a further portion
of its environmental-related liability. The review under way is
expected to be completed in the second or third quarter of this
year. The estimation of reserves for reported environmental
claims is likely to change as additional information emerges and
reserving techniques continue to develop. The company is expected
to be affected adversely in 1995 by losses for environmental and
asbestos claims and related litigation expenses, and such effect
could be material to the company's future results, liquidity
and/or capital resources.
<PAGE> 31
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
International
_____________
<TABLE>
<CAPTION>
Operating Summary
(Millions) Three Months Ended March 31
__________________________________
1995 1994 % Change
____ ____ ________
<S> <C> <C> <C>
Premiums............................ $ 220.6 $ 204.6 7.8%
Net investment income............... 68.3 77.3 (11.6)
Fees and other income............... 26.3 21.5 22.3
Net realized capital gains (losses). (3.8) 6.7 -
_________ _________
Total revenue.................... 311.4 310.1 .4
Current and future benefits......... 196.8 189.4 3.9
Operating expenses.................. 83.3 85.7 (2.8)
Amortization of deferred policy
acquisition costs.................. 13.8 11.6 19.0
_________ _________
Total benefits and expenses...... 293.9 286.7 2.5
_________ _________
Income before income taxes.......... 17.5 23.4 (25.2)
Income tax expenses................. 3.4 9.8 (65.3)
_________ _________
Net income.......................... $ 14.1 $ 13.6 3.7
_________ _________
_________ _________
Net realized capital gains (losses),
net of tax (included above)........ $ (2.8) $ 3.0 -
_________ _________
_________ _________
</TABLE>
International's net income for the three months ended March 31,
1995 was relatively level with the same period a year ago.
Excluding net realized capital gains and losses, results for the
three months ended March 31, 1995 increased $6 million from the
same period a year ago. The improvement in first quarter results
primarily reflected increased earnings in the Pacific Rim and
Chile. Results in Mexico for the first quarter of 1995 were flat
compared to the same period in 1994. Such results reflected
higher investment income of, and the company's increased
investment in, a Mexican insurance operation, which were offset by
the effect of the devaluation of the Mexican peso.
During the third quarter of 1994, the company changed its
accounting for its Korean affiliate from the consolidated basis of
accounting to the equity basis of accounting. In the first
quarter of 1994, the company recognized revenue of $50 million and
benefits and expenses of $50 million from the affiliate. During
the first quarter of 1995, the company sold its interest in the
affiliate at book value.
During the first quarter of 1995, the company increased its
ownership in several of its Chilean operating subsidiaries. The
effects of this increased ownership are not expected to materially
impact the results of the segment.
<PAGE> 32
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Corporate
_________
<TABLE>
<CAPTION>
Operating Summary
(Millions, after-tax) Three Months Ended March 31
__________________________________
1995 1994 % Change
____ ____ ________
<S> <C> <C> <C>
Interest expense.................... $ 18.1 $ 13.4 35.1%
Other expense....................... 32.0 51.8 (38.2)
</TABLE>
The increase in interest expense of $5 million in the first
quarter of 1995 compared to the same period a year ago resulted
from the issuance by a subsidiary of $275 million of 9 1/2 %
cumulative monthly income preferred securities in November 1994.
Other expense for the three months ended March 31, 1995 and 1994
included after-tax capital losses of $2 million and $7 million,
respectively. Excluding realized capital losses, the decrease in
other expenses in 1995 resulted from a reduction of corporate
staff area expenses associated with the company's 1994
restructuring.
<PAGE> 33
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments
___________________________
The company's invested assets were comprised of the following, net
of impairment reserves:
<TABLE>
<CAPTION>
March 31, December 31,
(Millions) 1995 1994
____________________________________________________________________________
<S> <C> <C>
Debt securities:
Held for investment, at amortized
cost (fair value $1,884.9 and $1,991.2) $ 1,871.9 $ 2,000.8
Available for sale, at fair value
(amortized cost $37,495.5 and $36,984.2) 36,715.8 35,110.7
Equity securities, at fair value
(cost $1,135.8 and $1,326.9) 1,489.7 1,655.6
Short-term investments 434.0 450.4
Mortgage loans 11,321.3 11,843.6
Real estate 1,545.7 1,545.7
Policy loans 558.8 533.8
Other 1,099.4 1,152.7
__________________________________________________________________________
Total invested assets $ 55,036.6 $ 54,293.3
__________________________________________________________________________
________________________
</TABLE>
Please refer to the 1994 Annual Report to Shareholders for a
description of the company's investment objectives and policies.
The change in invested assets from December 31, 1994 to March 31,
1995 primarily reflected appreciation of debt securities due to a
decrease in interest rates, partially offset by a decrease in
mortgage loans. Unrealized capital losses on debt securities
decreased from $1.9 billion at December 31, 1994 to $780 million
at March 31, 1995. Of such net unrealized capital losses at March
31, 1995, gains of $15 million and losses of $202 million related
to assets supporting discontinued products and experience rated
pension contractholders, respectively. The decrease in mortgage
loans principally reflected prepayments, payments at maturity on
mortgage loans and the company's adoption of FAS Nos. 114 and 118
on January 1, 1995.
The risks associated with investments supporting experience rated
pension and annuity products are assumed by those customers
subject to, among other things, certain minimum guarantees. The
anticipated future losses associated with investments supporting
discontinued products were provided for in the loss on
discontinuance of products.
<PAGE> 34
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
Debt Securities
As of March 31, 1995 and December 31, 1994, the company's
investments in debt securities represented 70% and 68%,
respectively, of total general account invested assets and were as
follows:
<TABLE>
<CAPTION>
March 31, December 31,
(Millions) 1995 1994
__________________________________________________________________________
<S> <C> <C>
Supporting discontinued products $ 6,181.8 $ 6,155.0
Supporting experience rated products 12,228.7 11,770.5
Supporting remaining products 20,177.2 19,186.0
____________________________
Total $38,587.7 $37,111.5
____________________________
____________________________
</TABLE>
Included in the company's total debt security balances were the
following categories of debt securities:
<TABLE>
<CAPTION>
(Millions) March 31, 1995
_______________________________________________________________________________________________________
"Below Investment "Problem" Debt "Potential Problem"
Grade" Debt Securities Securities Debt Securities
______________________ ______________ ___________________
<S> <C> <C> <C>
Total $1,683.6 $ 169.2 $ 156.5
________ ________ ________
________ ________ ________
Percentage of total:
Supporting discontinued products 30.3% 35.6% 35.2%
Supporting experience rated products 25.9 13.5 27.2
Supporting remaining products 43.8 50.9 37.6
________ ________ ________
100.0% 100.0% 100.0%
________ ________ ________
________ ________ ________
December 31, 1994
________________________________________________________________
"Below Investment "Problem" Debt "Potential Problem"
Grade" Debt Securities Securities Debt Securities
______________________ ______________ ___________________
<S> <C> <C> <C>
Total $1,873.0 $ 146.4 $ 170.0
________ ________ ________
________ ________ ________
Percentage of total:
Supporting discontinued products 27.8% 35.6% 27.9%
Supporting experience rated products 25.8 14.3 29.6
Supporting remaining products 46.4 50.1 42.5
________ ________ ________
100.0% 100.0% 100.0%
________ ________ ________
________ ________ ________
</TABLE>
"Below investment grade" debt securities (which include "problem"
debt securities and "potential problem" debt securities described
below) are defined to be securities that carry a rating below BBB-
/Baa3. Such debt securities have been written down for other than
temporary declines in value.
<PAGE> 35
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
Management defines "problem" debt securities to be securities for
which payment is in default, securities of issuers which are
currently in bankruptcy or in out-of-court reorganizations, or
securities of issuers for which bankruptcy or reorganization
within six months is considered likely.
"Potential problem" debt securities are currently performing debt
securities for which neither payment default nor debt
restructuring is anticipated within six months, but whose issuers
are experiencing significant financial difficulties. Identifying
such potential problem debt securities requires significant
judgment as to likely future market conditions and developments
specific to individual debt securities.
The company does not accrue interest on problem debt securities
when management believes the likelihood of collection of interest
is doubtful. Lost investment income on problem debt securities
was as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
__________________
(Millions) 1995 1994
___________________________________________________________
<S> <C> <C>
Allocable to discontinued products $ .4 $ .8
Allocable to experience rated products .2 .5
Allocable to remaining products 1.1 1.2
</TABLE>
At March 31, 1995 and December 31, 1994, the carrying value (fair
value) of collateralized mortgage obligations ("CMOs") was $3.6
billion and $3.4 billion, respectively. The principal risks
inherent in holding CMOs are prepayment and extension risks
related to dramatic decreases and increases in interest rates
whereby the value of the CMOs would be subject to variability on
the repayment of principal from the underlying mortgages earlier
or later than originally anticipated. At March 31, 1995 and
December 31, 1994, approximately 77% and 82%, respectively, of the
company's CMO holdings consisted of sequential and planned
amortization class ("PAC") bonds that are subject to less
prepayment and extension risk than other CMO instruments. At
March 31, 1995 and December 31, 1994, approximately 71% and 74%,
respectively, of the company's CMO holdings were collateralized by
residential mortgage loans, on which the timely payment of
principal and interest is backed by specified government agencies
(e.g., GNMA, FNMA, FHLMC).
<PAGE> 36
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
Mortgage Loans
During the first quarter of 1995, the mortgage loan portfolio was
reduced 4% to $11.3 billion, net of impairment reserves. The
company's mortgage loan investments, net of impairment reserves,
supported the following types of business:
<TABLE>
<CAPTION>
March 31, December 31,
(Millions) 1995 1994
______________________________________________________________________
<S> <C> <C>
Supporting discontinued products $ 4,205.7 $ 4,294.9
Supporting experience rated products 3,309.8 3,652.1
Supporting remaining products 3,805.8 3,896.6
_____________________________
Total $11,321.3 $11,843.6
_____________________________
_____________________________
</TABLE>
During the first quarter of 1995, the company continued to manage
its mortgage loan portfolio to reduce the balance in absolute
terms and relative to invested assets, and to reduce its overall
risk. Mortgage loans, net of impairment reserves, now represent
21% of total general account invested assets, down from 38% in
1990. During this period, the principal balance of the mortgage
portfolio was reduced by 47%. The principal balance of mortgage
loans decreased $303 million since December 31, 1994 primarily
reflecting the effect of repayments of maturing loans and loan
prepayments.
During 1994, the company implemented a troubled debt restructuring
program. The primary objective of this program is to restructure
eligible loans in a manner which creates a market rate transaction
which will perform in accordance with its restructured terms. The
program is applied to those loans which have sound property and
borrower fundamentals but possess excess debt. An important
feature of these loans is that in exchange for principal
forgiveness on a portion of the loan, the company typically
retains the right to participate in property appreciation to the
extent market conditions improve in the future.
In those situations where the property fundamentals do not support
a restructuring of the loan, the company generally acquires the
collateral through foreclosure. Loans with a principal balance of
$21 million and collateral with a fair market value of $10 million
were foreclosed upon in the first quarter of 1995. In certain
cases, the company has taken substantive possession of the
property supporting its loan, coupled with the borrower
surrendering its interest in the future economic benefits in the
property. Where this has occurred, the loans are considered in-
substance foreclosures, written down to their fair market value
less selling costs and classified as real estate held for sale.
At March 31, 1995 and December 31, 1994, there were $153 million
and $193 million, respectively, of in-substance foreclosures (net
of write-offs of $94 million and $136 million, respectively).
<PAGE> 37
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
Included in the company's total mortgage loan balances were the
following categories of mortgage loans:
<TABLE>
<CAPTION>
(Millions) March 31, 1995
__________________________________________________________________________________________________________
Restructured Potential
Problem Loans Loans Problem Loans* Total
_____________ ____________ ______________ _____
<S> <C> <C> <C> <C>
Total $ 764.9 $ 693.6 $1,028.3 $2,486.8
________ ________ ________ ________
________ ________ ________ ________
Percentage of total:
Supporting discontinued products 37.6% 39.4% 46.6%
Supporting experience rated products 26.6 31.9 28.3
Supporting remaining products 35.8 28.7 25.1
________ ________ ________
100.0% 100.0% 100.0%
________ ________ ________
________ ________ ________
Impairment reserves (1) $1,003.6**
________
________
Impairment reserves as
a percentage of total 40.4%
________
________
December 31, 1994
__________________________________________________________________________________________________________
Restructured Potential
Problem Loans Loans Problem Loans* Total
_____________ ____________ ______________ _____
<S> <C> <C> <C> <C>
Total $ 673.1 $ 706.1 $ 918.7 $2,297.9
________ ________ ________ ________
________ ________ ________ ________
Percentage of total:
Supporting discontinued products 36.9% 39.1% 48.8%
Supporting experience rated products 30.8 31.1 25.5
Supporting remaining products 32.3 29.8 25.7
________ ________ ________
100.0% 100.0% 100.0%
________ ________ ________
________ ________ ________
Impairment reserves (1) $ 784.1**
________
________
Impairment reserves as
a percentage of total 34.1%
________
________
<FN>
(1) Please see Note 5 of Condensed Notes to Financial Statements for composition of
impairment reserves between specific and general impairment reserves.
* In connection with the company's adoption of FAS Nos. 114 and 118 on January 1, 1995
(Please see Note 5 of Condensed Notes to Financial Statements), management has revised
the definition of "potential problem loans". (Please see "potential problem loans"
on page 38.)
** The general reserve at December 31, 1994 excluded reserves of approximately $208.5
million related to experience rated products. Had such reserves been included, total
reserves would have been $992.6 million. In connection with the company's adoption
of FAS No. 114 and 118, the general reserve at March 31, 1995 included such reserve,
related to experience rated products. The inclusion of these reserves did not impact
earnings or shareholders' equity.
</TABLE>
"Problem loans" are defined to be loans with payments over 60 days
past due, loans on properties in the process of foreclosure, loans
on properties involved in bankruptcy proceedings and loans on
properties subject to redemption. Loans on properties in the
process of foreclosure increased to $513 million at March 31, 1995
from $422 million at December 31, 1994.
<PAGE> 38
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
"Restructured loans" are loans whose original contract terms have
been modified to grant concessions to the borrower and are
currently performing pursuant to such modified terms.
Restructured loans that have a market rate of interest at the time
of the restructure (which represents the interest rate the company
would charge for a new loan with comparable risk) and demonstrate
sustainable performance (as generally evidenced by six months of
pre- or post-restructuring payment performance in accordance with
the restructured terms) may be returned to performing status.
(Please see the company's 1994 Annual Report to Shareholders for a
complete description of the company's restructuring program.) No
such restructures and transfers to performing status occurred
during the three month period ended March 31, 1995.
In connection with the company's adoption of FAS Nos. 114 and 118
on January 1, 1995 (Please see Note 5 of Condensed Notes to
Financial Statements), management has revised the definition of
"potential problem loans" to include all loans which are
performing pursuant to existing terms and are considered likely to
become classified as problem or restructured loans. Prior to
January 1, 1995, "potential problem loans" were performing loans
which management believed were likely to become classified as
problem or restructured loans in the next 12 months or so. As a
result of the revised definition, "potential problem loans" at
March 31, 1995 are approximately $215 million higher than they
would have been had the definition not been changed. "Potential
problem loans" are identified through the portfolio review process
on the basis of known information about the ability of borrowers
to comply with present loan terms. Identifying such potential
problem loans requires significant judgment as to likely future
market conditions and developments specific to individual
properties and borrowers. Provision for losses that management
believes are likely to arise from such potential problem loans is
included in the specific impairment reserves. (Please see Note 5
of Condensed Notes to Financial Statements for a discussion of
mortgage loan impairment reserves.)
<PAGE> 39
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
The company does not accrue interest on problem loans or
restructured loans when management believes the collection of
interest is unlikely. The amount of pretax investment income
required by the original terms of such problem and restructured
loans outstanding at March 31 and the portion thereof actually
recorded as income were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
__________________
(Millions) 1995 1994
_________________________________________________________
<S> <C> <C>
Income which would have been
recorded under original terms
of loans $ 33.6 $ 73.9
Income recorded 11.9 34.1
_______ _______
Lost investment income $ 21.7 $ 39.8
_______ _______
_______ _______
Lost investment income allocated to
investments supporting discontinued
products (included above) $ 9.5 $ 16.7
_______ _______
_______ _______
Lost investment income allocated to
investments supporting experience
rated pension products
(included above) $ 7.1 $ 12.8
_______ _______
_______ _______
Lost investment income allocated to
investments supporting remaining
products (included above) $ 5.1 $ 10.3
_______ _______
_______ _______
</TABLE>
<PAGE> 40
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
Real Estate
The company's equity real estate balances, net of write-downs and
reserves, were as follows:
<TABLE>
<CAPTION>
(Millions) March 31, 1995
________________________________________________________________________________________________
Investment Properties Total Equity
Real Estate Held for Sale Real Estate
___________ _____________ ____________
<S> <C> <C> <C>
Total $ 387.5 $1,158.2 (1) $1,545.7
________ ________ ________
________ ________ ________
Percentage of total:
Supporting discontinued products 22.3% 54.3%
Supporting experience rated products 7.3 22.1
Supporting remaining products 70.4 23.6
________ ________
100.0% 100.0%
________ ________
________ ________
December 31, 1994
_________________________________________________________
Investment Properties Total Equity
Real Estate Held for Sale Real Estate
___________ _____________ ____________
<S> <C> <C> <C>
Total $ 382.3 $1,163.4 (1) $1,545.7
________ ________ ________
________ ________ ________
Percentage of total:
Supporting discontinued products 23.8% 54.9%
Supporting experience rated products 8.3 21.6
Supporting remaining products 67.9 23.5
________ ________
100.0% 100.0%
________ ________
________ ________
<FN>
(1) Includes $152.7 million and $193.4 million of in-substance foreclosures at
March 31, 1995 and December 31, 1994, respectively. (Please see "Mortgage Loans"
on page 36 for discussion of in-substance foreclosures.)
</TABLE>
All real estate acquired through foreclosure, including in-
substance foreclosures, is classified as properties held for sale.
These properties were carried at 60% of the company's cash
investment (unpaid mortgage balance plus capital additions) at
March 31, 1995 and December 31, 1994.
Investment real estate, which is generally carried at depreciated
cost, is written down to fair value to reflect other than
temporary declines in market value. The fair value of assets
acquired through foreclosure is established as the cost basis at
the time of foreclosure. Subsequent to acquisition, properties
classified as held for sale are carried at the lower of cost or
fair value less estimated selling costs. Adjustments to the
carrying value of properties held for sale resulting from changes
in fair value, are recorded in a valuation reserve. Property
valuations are reviewed regularly by investment management.
Capital additions and asset improvements increase the cost basis
of the asset while depreciation reduces the cost basis.
<PAGE> 41
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
Total real estate write-downs and valuation reserves on properties
included in the company's equity real estate balances were as
follows:
<TABLE>
<CAPTION>
March 31, December 31,
(Millions) 1995 1994
______________________________________________________________________
<S> <C> <C>
Allocable to discontinued products $ 372.8 $ 376.0
Allocable to experience rated products 186.2 179.6
Allocable to remaining products 201.9 206.6
________ ________
Total $ 760.9 $ 762.2
________ ________
________ ________
</TABLE>
For the periods shown below, total after-tax net realized capital
losses from real estate write-downs and changes in the valuation
reserves were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
___________________
(Millions) 1995 1994
_______________________________________________________________
<S> <C> <C>
Allocable to discontinued products (1) $ - $ 12.6
Allocable to experience
rated products (2) - .1
Allocable to remaining products - (1.6)
<FN>
(1) Write-downs and impairment expense allocable to discontinued
products are charged against the reserve for future losses
and do not affect the company's results of operations.
(2) Write-downs and impairment expense allocable to experience rated
products do not affect the company's results of operations.
</TABLE>
Use of Derivatives and Other Investments
The company's hedging activity has been limited and has
principally consisted of using futures, forward contracts and
interest rate swaps to hedge interest rate risk and currency risk.
These instruments taken alone subject the company to varying
degrees of market and credit risk. However, when used for
hedging, the expectation is that these instruments would reduce
overall market and interest rate risk. Market risk is the risk
that future changes in market prices may decrease the market value
of one or all of these financial instruments. Credit risk arises
from the potential inability of counterparties to perform under
the terms of the contracts. Management does not believe that the
current level of hedging activity will have a material effect on
the company's liquidity or results of operations. (Please see
Note 9 of Condensed Notes to Financial Statements for a discussion
of the company's hedging activities.)
<PAGE> 42
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
The company also had investments in certain debt instruments with
derivative characteristics, including those where market value is
at least partially determined by, among other things, levels of or
changes in domestic and/or foreign interest rates (short term or
long term), exchange rates, prepayment rates, equity markets or
credit ratings/spreads. The amortized cost and fair value of
these securities, included in the $38.6 billion debt securities
portfolio, as of March 31, 1995 was as follows:
<TABLE>
<CAPTION>
Amortized Fair
(Millions) Cost Value
_____________________________________________________________________________
<S> <C> <C>
Collateralized mortgage obligations:............ $ 3,637.0 $ 3,560.5
Interest-only strips (included above)......... 19.1 34.5
Principal-only strips (included above)........ 54.2 61.0
Treasury and agency strips:
Principal..................................... 1,158.8 1,047.2
Interest...................................... 101.2 90.7
Warrants to purchase debt securities (1)........ 9.4 7.8
Mandatorily convertible preferred stock......... 12.1 12.0
<FN>
(1) Represents the right to purchase specific debt securities and is accounted
for as a hedge. Upon exercise, the cost of the warrants will be added to
the basis of the debt securities purchased and amortized over their lives.
</TABLE>
<PAGE> 43
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Liquidity and Capital Resources
_______________________________
Cash and cash equivalents at March 31, 1995 and December 31, 1994
were $3.1 billion and $3.0 billion, respectively. For the three
months ended March 31, 1995, net cash used for operating
activities was $1 million. Net cash used for operating activities
was $1.1 billion during the first three months of 1994.
For the first three months of 1995, net cash provided by investing
activities was $681 million and included $552 million from
maturities and repayments of mortgage loans. Net cash provided by
investing activities of $1.4 billion for the three months ended
March 31, 1994 included $110 million provided by a decrease in
short-term investments.
Short-term borrowings are used from time to time to provide for
timing differences between receipts and disbursements in various
portfolios. The maximum amount of domestic short-term borrowings
outstanding during the first three months of 1995 was $144
million.
As a result of adverse conditions in real estate markets and tight
lending practices by banks and other financial institutions over
the past several years, the company has extended the maturity of,
and adjusted interest rates to current market on, certain maturing
mortgage loans where the borrower was unable to obtain financing
elsewhere. Of the $221 million of mortgage loans scheduled to
mature during the first three months of 1995, $145 million were
not paid as scheduled, a substantial portion of which supported
large case pension liabilities. Of the loans not paid as
scheduled, $58 million were extended at interest rates at least
equal to current market (average rate of 10% over an average
extension period of 4 years) and $87 million were under
forbearance (continuing to make payments under original loan
terms) or under discussion with borrowers at March 31, 1995. Of
the $87 million of loans under forbearance or under discussion
with borrowers, $11 million were classified as problem or
restructured loans at March 31, 1995. Despite various indications
that liquidity is returning to certain real estate markets, the
company expects it will continue to extend or refinance maturing
loans in the portfolio.
Pursuant to shelf registration statements declared effective by
the Securities and Exchange Commission the company may offer and
sell up to $550 million of various types of securities, and Aetna
Capital L.L.C., a subsidiary of the company, may offer and sell up
to an additional $225 million of preferred securities.
Dividends Declared
On February 24, 1995, the Board of Directors declared a quarterly
dividend of $.69 per share of common capital stock for
shareholders of record at the close of business on April 28, 1995,
payable May 15, 1995.
<PAGE> 44
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Other Matters
_____________
Income Taxes
Net unrealized capital gains and losses are presented in
shareholders' equity net of deferred taxes. At March 31, 1995,
$238 million of net unrealized capital losses primarily on
available for sale debt and equity securities were reflected in
shareholders' equity without deferred tax benefits. For federal
income tax purposes, capital losses are deductible only against
capital gains in the year of sale or during the carryback and
carryforward periods (three and five years, respectively). Due to
the expected full utilization of capital gains in the carryback
period and the uncertainty of future capital gains, a valuation
allowance of $83 million related to the net unrealized capital
losses has been reflected in shareholders' equity at March 31,
1995. In addition, $201 million at March 31, 1995, of unrealized
capital losses related to experience rated contracts are not
reflected in shareholders' equity since such losses, if realized,
will be charged to contractholders. However, the potential loss
of tax benefits on such losses is the risk of the company and
therefore would adversely affect the company rather than the
contractholder. Accordingly, an additional valuation allowance of
$71 million has been reflected in shareholders' equity as of March
31, 1995. Any reversals of the valuation allowance are contingent
upon the recognition of future capital gains in the company's
federal income tax return or a change in circumstances which
causes the recognition of the benefits to become more likely than
not. Non-recognition of the deferred tax benefits on net
unrealized losses described above had no impact on net income for
the three months ended March 31, 1995, but has the potential to
adversely affect future results if such losses are realized.
Potential losses of tax benefits related to net unrealized losses
on assets supporting the discontinued products are not expected to
adversely affect the company's future results.
Severance and Facilities Charges
During the three months ended March 31, 1995, the company charged
costs of $39 million to the severance and facilities reserve
established in 1993 related to cost reduction actions. Of the
approximately 4,000 positions expected to be eliminated,
approximately 3,600 had been eliminated by March 31, 1995 and the
related severance benefits charged against the reserve. The
remaining headcount reductions are expected to be substantially
completed by the first half of 1995. The annualized after-tax
savings of approximately $200 million related to these and other
cost reduction actions are expected in 1995.
New Accounting Pronouncements
_____________________________
Please see Note 2 of Condensed Notes to Financial Statements for a
discussion of recently issued accounting pronouncements.
<PAGE> 45
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In Re: Stepak v. Aetna Life and Casualty Company, et al.
_________________________________________________________
A full description of this litigation is contained under "Item 3.
Legal Proceedings" in the company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 17,
1995. On March 24, 1995, the United States Court of Appeals for
the Second Circuit affirmed the judgment of the United States
District Court for the District of Connecticut in favor of the
company and all other defendants.
In Re: Attorneys General Antitrust Litigation
______________________________________________
A full description of this litigation is contained in Note 19 of
Notes to Financial Statements in the company's 1994 Annual Report
to Shareholders. On March 29, 1995, the United States District
Court for the Northern District of California approved the
plaintiffs' settlement of this litigation with all defendants,
including The Aetna Casualty and Surety Company ("Aetna").
Aetna's share of the settlement is not material.
Other Litigation
________________
The company is continuously involved in numerous other lawsuits
arising, for the most part, in the ordinary course of its business
operations either as a liability insurer defending third-party
claims brought against its insureds or as an insurer defending
coverage claims brought against itself, including lawsuits related
to issues of policy coverage and judicial interpretation. One
such area of coverage litigation involves legal liability for
environmental and asbestos-related claims. These lawsuits and
other factors make reserving for these claims subject to
significant uncertainties.
While the ultimate outcome of such litigation cannot be determined
at this time, such litigation (other than that related to
environmental and asbestos-related claims, which is subject to
significant uncertainties), net of reserves established therefor
and giving effect to reinsurance probable of recovery, is not
expected to result in judgments for amounts material to the
financial condition of the company, although it may adversely
affect results of operations in future periods. The company is
expected to be affected adversely in the future by losses for
environmental and asbestos-related claims and related litigation
expenses and such effect could be material to the company's future
results, liquidity and/or capital resources.
Item 5. Other Information.
(a) NAIC IRIS Ratios
The NAIC IRIS ratios cover 12 categories of financial data with
defined usual ranges for each category. The ratios are intended
to provide insurance regulators "early warnings" as to when a
given company might warrant special attention. An insurance
company may fall out of the usual range for one or more ratios and
such variances may result from specific transactions that are in
themselves immaterial or eliminated at the consolidated level.
Two of Aetna Life and Casualty Company's significant subsidiaries
had more than two IRIS ratios that were outside of the NAIC usual
ranges for 1994.
<PAGE> 46
Item 5. Other Information. (Continued)
Aetna Life Insurance Company ("ALIC") fell outside the usual
ranges in 1994 for: (i) the Net Gain to Total Income Ratio which
is calculated by dividing the net gain from operations (including
realized capital gains and losses) by total income (including
capital gains and losses); (ii) the Adequacy of Investment Income
Ratio which compares investment income to credited interest; (iii)
the Total Real Estate and Total Mortgage Loans to Cash and
Invested Assets Ratio which measures the relative size of the real
estate and mortgage loan portfolios; (iv) the Change in Premium
Ratio which is calculated by dividing the current year change in
total premiums, annuity considerations and other fund deposits by
total premiums, annuity considerations and other fund deposits for
the prior year; and (v) the Change in Reserving Ratio which
represents the number of percentage points of difference between
the reserving ratio for current and prior year. The reserving
ratio is equal to the aggregate increase in reserves for
individual life insurance taken as a percentage of renewal and
single premiums for individual life insurance.
The Aetna Casualty & Surety Company of America ("ACSCA") fell
outside of the usual ranges in 1994 for: (i) the Two-year Overall
Operating Ratio, which is a combination of a two-year combined
ratio minus a two-year investment income ratio; (ii) the Change in
Surplus Ratio which measures the improvement or deterioration in a
company's financial condition during the year; and (iii) the Two-
Year Reserve Development to Surplus Ratio which measures the
change in prior years' estimates calculated as a percentage of
policyholders' surplus two years previous.
Management does not believe that ALIC or ACSCA will warrant
special attention by the regulators. Management also does not
believe that the factors causing the ratios to fall outside of the
usual ranges will have a significant impact on future operations
of the company.
(b) Ratios of Earnings to Fixed Charges and Earnings to
Combined Fixed Charges and Preferred Stock Dividends
The following table sets forth the company's ratio of earnings to
fixed charges and ratio of earnings to combined fixed charges and
preferred stock dividends for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended Years ended December 31
____________________________________
March 31, 1995 1994 1993 1992 1991 1990
__________________ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.... 5.93 4.60 (a) .42(b) 2.13 3.03
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends 5.93 4.60 (a) .42(b) 2.13 3.03
<FN>
(a) The company reported a pretax loss from continuing operations in 1993 which was
inadequate to cover fixed charges by $1.1 billion.
(b) Earnings were inadequate to cover fixed charges by $112.8 million in 1992.
</TABLE>
<PAGE> 47
Item 5. Other Information. (Continued)
For purposes of computing both the ratio of earnings to fixed
charges and the ratio of earnings to combined fixed charges and
preferred stock dividends, "earnings" represent consolidated
earnings from continuing operations before income taxes,
cumulative effect adjustments and extraordinary items plus fixed
charges and minority interest. "Fixed charges" consist of
interest (and the portion of rental expense deemed representative
of the interest factor) and includes the dividends paid to
preferred shareholders of a subsidiary. (See Note 11 of Notes to
Financial Statements in the company's 1994 Annual Report to
Shareholders.) For the three months ended March 31, 1995 and for
the years ended December 31, 1994, 1993, 1992, 1991 and 1990 there
was no preferred stock outstanding. As a result, the ratios of
earnings to combined fixed charges and preferred stock dividends
were the same as the ratios of earnings to fixed charges.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(12) Statement Re Computation of Ratios.
(12.1) Computation of ratio of earnings to fixed charges and
ratio of earnings to combined fixed charges and
preferred stock dividends for the three months ended
March 31, 1995 and for the years ended December 31,
1994, 1993, 1992, 1991 and 1990.
(15) Letter Re Unaudited Interim Financial Information.
(15.1) Letter from KPMG Peat Marwick LLP acknowledging
awareness of the use of a report on unaudited
interim financial information, dated
April 28, 1995.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
None.
<PAGE> 48
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Aetna Life and Casualty Company
_______________________________
(Registrant)
Date April 28, 1995 By /s/ ROBERT E. BROATCH
_____________________________________
(Signature)
Robert E. Broatch
Senior Vice President, Finance,
and Corporate Controller (Chief
Accounting Officer)
<PAGE> 1
AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
3 Months Ended
(Millions) March 31, 1995 1994 1993 1992 1991 1990
______________ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C>
Pretax income (loss) from
continuing operations........... $ 239.9 $ 658.3 $(1,147.4) $ (121.4) $ 243.5 $ 459.6
Add back fixed charges............ 50.0 186.1 171.0 194.3 221.5 229.0
Minority interest................ 6.4 11.4 7.0 8.6 5.9 4.9
________ _________ _________ ________ ________ ________
Income (loss) as adjusted..... $ 296.3 $ 855.8 (969.4) $ 81.5 $ 470.9 $ 693.5
________ _________ _________ ________ ________ ________
________ _________ _________ ________ ________ ________
Fixed charges:
Interest on indebtedness....... $ 29.1(1) $ 98.6(1) $ 77.4 $ 81.4 $ 110.9 $ 119.9
Portion of rents representative
of interest factor............ 20.9 87.5 93.6 112.9 110.6 109.1
________ _________ _________ ________ ________ ________
Total fixed charges........... $ 50.0 $ 186.1 $ 171.0 $ 194.3 $ 221.5 $ 229.0
________ _________ _________ ________ ________ ________
________ _________ _________ ________ ________ ________
Preferred stock dividend
requirements.................... - - - - - -
________ _________ _________ ________ ________ ________
Total combined fixed charges
and preferred stock dividend
requirements.................... $ 50.0 $ 186.1 $ 171.0 $ 194.3 $ 221.5 $ 229.0
________ _________ _________ ________ ________ ________
________ _________ _________ ________ ________ ________
Ratio of earnings to fixed
charges......................... 5.93 4.60 (5.67) 0.42 2.13 3.03
________ _________ _________ ________ ________ ________
________ _________ _________ ________ ________ ________
Ratio of earnings to combined
fixed charges and preferred
stock dividends................. 5.93 4.60 (5.67) 0.42 2.13 3.03
________ _________ _________ ________ ________ ________
________ _________ _________ ________ ________ ________
<FN>
(1) Includes the dividends paid to preferred shareholders of a subsidiary.
(See Note 11 of Notes to Financial Statements in the company's 1994 Annual
Report to Shareholders.)
</TABLE>
<PAGE> 1
Letter Re: Unaudited Interim Financial Information
___________________________________________________
Aetna Life and Casualty Company
Hartford, Connecticut
Gentlemen:
Re: Registration Statements No. 2-73911, 2-91514, 33-12993,
33-49543, 33-50427, 33-52819 and 33-52819-01
With respect to the subject registration statements, we
acknowledge our awareness of the use therein of our report dated
April 27, 1995 related to our review of interim financial
information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such
report is not considered a part of a registration statement
prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11
of the Act.
By /s/ KPMG PEAT MARWICK LLP
_____________________________
(Signature)
KPMG Peat Marwick LLP
Hartford, Connecticut
April 28, 1995
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in the Form 10-Q for the quarterly period ended
March 31, 1995 for Aetna Life and Casualty Company and is qualified in its
entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<DEBT-HELD-FOR-SALE> 36,716
<DEBT-CARRYING-VALUE> 1,872
<DEBT-MARKET-VALUE> 1,885
<EQUITIES> 1,490
<MORTGAGE> 11,321
<REAL-ESTATE> 1,546
<TOTAL-INVEST> 55,037
<CASH> 3,144
<RECOVER-REINSURE> 5,019
<DEFERRED-ACQUISITION> 2,054
<TOTAL-ASSETS> 96,470
<POLICY-LOSSES> 17,472
<UNEARNED-PREMIUMS> 1,659
<POLICY-OTHER> 17,502
<POLICY-HOLDER-FUNDS> 23,561
<NOTES-PAYABLE> 1,114
<COMMON> 1,418
0
0
<OTHER-SE> 4,805
<TOTAL-LIABILITY-AND-EQUITY> 96,470
2,929
<INVESTMENT-INCOME> 1,086
<INVESTMENT-GAINS> (6)
<OTHER-INCOME> 476
<BENEFITS> 3,122
<UNDERWRITING-AMORTIZATION> 187
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 240
<INCOME-TAX> 79
<INCOME-CONTINUING> 161
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 161
<EPS-PRIMARY> 1.42
<EPS-DILUTED> 0<F1>
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>There is not a significant difference between primary and fully diluted
earnings per share.
</FN>
</TABLE>