VARIABLE ANNUITY ACCOUNT G OF AETNA LIFE INSURAN & ANUITY CO, 497, 1995-10-02

VARIABLE ANNUITY ACCOUNT G OF AETNA LIFE INSURAN & ANUITY CO
497, 1995-10-02

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<PAGE>

Aetna Life Insurance and Annuity Company
151 Farmington Avenue, Hartford, Connecticut 06156
1-800-531-4547

VARIABLE ANNUITY ACCOUNT G
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
<REDLINE>
Prospectus Dated October 2, 1995
</REDLINE>
MULTI VEST* PLAN -- An Individual Deferred Variable Annuity

This Prospectus describes the individual deferred variable annuity contract
("Contract") originally issued by Confederation Life Insurance and Annuity
Company ("Confederation"). The Contract allows tax-deferred capital
accumulation and provides future fixed income for retirement or other long-
term purposes by allowing Purchase Payments to be allocated on a variable
basis, a fixed basis or a combination of both.

<REDLINE>
On August 12, 1994 Confederation was placed in rehabilitation by the Fulton
County, Georgia Superior Court and ceased sales of new Contracts and
acceptance of additional Purchase Payments. On October 2, 1995, Aetna Life
Insurance and Annuity Company ("Aetna", "we", "our", or "us") assumed the
existing in-force Contracts in accordance with an Assumption Reinsurance
Agreement which was approved by the Fulton County, Georgia Superior Court
in connection with the rehabilitation of Confederation. Contract owners
will look to Aetna instead of Confederation to fulfill the terms of their
Contracts.

Aetna does not intend to resume sales of new Contracts; additional Purchase
Payments may continue to be made under existing Contracts subject to
certain limitations. See THE CONTRACT -- PURCHASE PAYMENTS AND ALLOCATING
YOUR PURCHASE PAYMENTS.
</REDLINE>

This Prospectus is intended to describe the Contract provisions relating to
the variable funding options and the fees and expenses that may be charged
in connection with Purchase Payments allocated to Variable Annuity Account
G of Aetna Life Insurance and Annuity Company (the "Separate Account").
Information with respect to the fixed funding option is included in the
Appendix to this Prospectus.

There are currently eight Subaccounts in the Separate Account. Each
Subaccount invests in a corresponding portfolio of the Oppenheimer Variable
Account Funds: the Oppenheimer Money Fund; the Oppenheimer High Income
Fund; the Oppenheimer Bond Fund; the Oppenheimer Capital Appreciation Fund;
the Oppenheimer Growth Fund; the Oppenheimer Multiple Strategies Fund; the
Oppenheimer Global Securities Fund; and the Oppenheimer Strategic Bond
Fund. Each Fund has distinct investment objectives and policies which are
described in the accompanying prospectus for the Oppenheimer Variable
<PAGE>

Account Funds. See FACTS ABOUT AETNA, THE SEPARATE ACCOUNT AND THE
OPPENHEIMER VARIABLE ACCOUNT FUNDS.

<REDLINE>
This Prospectus sets forth the basic information about the Separate Account
that a prospective investor should know before investing. Additional
information about the Separate Account is contained in a Statement of
Additional Information ("SAI") dated October 2, 1995, which has been filed
with the Securities and Exchange Commission ("SEC"). The Table of Contents
of the SAI is found in this Prospectus. An SAI is available at no charge
by indicating your request on the prospectus receipt or by calling 1-800-
531-4547

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
</REDLINE>

PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
<REDLINE>
DEFINITIONS 1
SUMMARY 4
FEE TABLE 6
CONDENSED FINANCIAL INFORMATION 9
FINANCIAL STATEMENTS 11
FACTS ABOUT AETNA, THE SEPARATE ACCOUNT, AND
THE OPPENHEIMER VARIABLE ACCOUNT FUNDS 11
Aetna Life Insurance and Annuity Company 11
Variable Annuity Account G 11
The Oppenheimer Variable Account Funds and
Investment Adviser 12
THE CONTRACT 13
Parties to the Contract 13
Purchase Payments and Allocating Your Purchase Payments 14
Value of the Accumulation Account and Unit Value 15
Allocation Changes 16
Transfers 16
Dollar Cost Averaging 16
Questions 17
CHARGES AND DEDUCTIONS 17
Surrender Charges 17
Mortality and Expense Risk Charge 18
Administration Fee 19
Annual Contract Fee 19
State Taxes 19
Other Taxes 19
Fund Expenses 19
DISTRIBUTIONS UNDER THE CONTRACT 20
Withdrawals 20
Systematic Withdrawal 20
Surrender 21
Death Proceeds 21
Payment 22
ANNUITY BENEFIT 22
Annuitization 22
Partial Annuity Benefit 23
Annuity Date 22
Annuity Options 23
Income Payments 23
FEDERAL TAX MATTERS 24
Introduction 24
Aetna's Tax Status 24
Taxation of Annuity Contracts in General 25

i
<PAGE>

Qualified Contracts 26
Other Tax Considerations 26
DISTRIBUTION OF THE CONTRACT 27
MISCELLANEOUS 28
Voting Rights 28
Changes in the Contract 28
Incontestability 28
Nonparticipating 28
Assignment 28
Annual Contract Report 29
Misstatement of Age or Sex 29
Telephone Transfers 29
Legal Proceedings 29
Legal Matters 29
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION 30
</REDLINE>
APPENDIX A -- THE FIXED ACCOUNT Appendix-1
</TABLE>

ii
<PAGE>

DEFINITIONS

Accumulation Account and Value of the Accumulation Account

The Accumulation Account is the account to which Net Purchase
Payments are credited. The Value of the Accumulation Account refers to the
combined value of your Contract in all of the Subaccounts of the Separate
Account and the Fixed Account.

Aetna

We, our, us, Aetna Life Insurance and Annuity Company.

Annuitant

The person on whose life the Income Payments are based and the person
you designate to receive Income Payments.

Annuity Date

The date on which the Annuity Option becomes effective.

Annuity Value

The Value of the Accumulation Account on the Annuity Date less the
Annual Contract Fee for the then current Contract Year and any applicable
State Taxes.

Beneficiary

The person designated by you to receive benefits in the event of your
death prior to the Annuity Date or to receive any remaining guaranteed
payments under an Income Option in the event of the death of the Annuitant
after the Annuity Date.

Code

The Internal Revenue Code of 1986, as amended.

Confederation

Confederation Life Insurance and Annuity Company.

Contract

The individual deferred variable annuity described in this
Prospectus.

Contract Date

The date the Contract becomes effective.

Contract Year

Each 12-month period starting the same day and month as the Contract
Date.

Fixed Account

A part of our General Account consisting of assets, from Contracts
such as the one described in this Prospectus, which are not allocated to
the Separate Account. See Appendix A.

Fund

A portfolio of Oppenheimer Variable Account Funds in which assets of
a corresponding Subaccount are invested.

General Account

Our corporate assets other than those segregated in any separate
account established by us.

Home Office

Our principal executive offices located at:
151 Farmington Avenue
Hartford, Connecticut 06156

Income Payment

The amount we pay to an Annuitant at regular intervals under an
Annuity Option.

Non-Qualified Contracts

Contracts other than Qualified Contracts.

Oppenheimer Variable Account Funds

The Oppenheimer Variable Account Funds, a diversified, open-end
management investment company (mutual fund) in which the Separate Account
invests.

Purchase Payment & Net Purchase Payment

A Purchase Payment is a premium paid to us as consideration for the
benefits provided by this Contract. A Net Purchase Payment is that portion
of each Purchase Payment which is credited to the Accumulation Account
after the deduction for State Taxes, if any.

Qualified Contracts

Contracts purchased by plans that qualify for special federal income
tax treatment or plans which are intended to qualify for special federal
income tax treatment under Code sections 401(a) and 403(b) or Contracts
purchased by individuals for their individual retirement accounts under
Code section 408.

SEC

The Securities and Exchange Commission.

Separate Account

Variable Annuity Account G of Aetna Life Insurance and Annuity
Company, established and maintained for the investment of the portion of
Net Purchase Payments from contracts such as the one described in this
Prospectus, which are not allocated to the Fixed Account.

State Taxes

Premium taxes imposed by certain jurisdictions on Purchase Payments
when received, or on values withdrawn, surrendered or annuitized.

Subaccount

A division of the Separate Account to which Net Purchase Payments may
be allocated. Each Subaccount invests in shares of a Fund.

Surrender

A request for the Surrender Value which terminates the Contract.

Surrender Charge

A contingent deferred sales load which may be charged in the event of
a Withdrawal or Surrender.

Surrender Value

The Value of the Accumulation Account less any applicable Surrender
Charges and State Taxes, and the Annual Contract Fee for the current Con-
tract Year.

Transfer

The reallocation of all or a portion of the value in one Subaccount
or the Fixed Account to another Subaccount or the Fixed Account.

Unit and Unit Value

A standard of measurement used to determine your value in each
Subaccount prior to the Annuity Date. Each Subaccount has a distinct Unit
Value which may vary from one Valuation Period to the next.

Valuation Date

Each day that both the New York Stock Exchange and Aetna Life
Insurance and Annuity Company are open for business.

Valuation Period

The period of time between two consecutive Valuation Dates, starting
from the close of business (4:00 pm Eastern Time) on one Valuation Date and
ending on the close of business on the next Valuation Date.

We, Our, Us

Aetna Life Insurance and Annuity Company or Aetna.

Withdrawal

The surrender of a portion of the Value of the Accumulation Account.

You and Your

The purchaser and Owner of the Contract.

1940 Act

The Investment Company Act of 1940, as amended.

SUMMARY

The following is a brief summary of some of the important features of
the Contract described in this Prospectus. Reference should be made to the
body of this Prospectus for more detailed information. Appendix A
describes the fixed funding option available under your Contract.

THE CONTRACT

The Contract allows tax-deferred capital accumulation and provides
future fixed income payments beginning on a date you choose. The amount of
your future fixed income will be based on the investment experience of the
assets underlying the Contract during the accumulation period. See THE
CONTRACT.

PURCHASE PAYMENTS

Additional Purchase Payments of at least $100 may be made at any time
prior to the Annuity Date. However, you are under no obligation to make
additional Purchase Payments. See THE CONTRACT -- PURCHASE PAYMENTS AND
ALLOCATING YOUR PURCHASE PAYMENTS.

WITHDRAWALS AND SURRENDERS

<REDLINE>
Prior to the Annuity Date, you may make unlimited Withdrawals or
Surrender your Contract for the Surrender Value. See DISTRIBUTIONS UNDER
THE CONTRACT and APPENDIX A -- THE FIXED ACCOUNT. You may be subject to a
penalty tax for an early withdrawal. See FEDERAL TAX MATTERS -- OTHER TAX
CONSIDERATIONS -- Penalty Tax on Certain Distributions.
</REDLINE>

SURRENDER CHARGES

A Surrender Charge may apply on the amounts withdrawn or surrendered.
See CHARGES AND DEDUCTIONS -- SURRENDER CHARGES.

TAXES AND WITHHOLDING

Purchase Payment and investment results of your Accumulation Account
are generally not taxable until distributed. Withholding for income tax
may be imposed on certain withdrawals. See FEDERAL TAX MATTERS.

CHARGES AND DEDUCTIONS

Certain charges and deductions are associated with the Contracts, for
example, State Taxes, annual contract fee, mortality and expense risk
charge and administrative fee. The Funds are also subject to certain fees
and expenses. See FEE TABLE; CHARGES AND DEDUCTIONS.

ANNUITY PAYMENTS

The Contract is an annuity which provides for a series of fixed
Income Payments. You may choose the date Income Payments begin, subject to
some limitations. The amount of and the length of Income Payments will be
based, in part, on the Annuity Option selected. See ANNUITY BENEFIT.

DEATH BENEFITS

Death proceeds are paid to your Beneficiary in the event of your
death and you have not annuitized all your Accumulation Account. See
ANNUITY BENEFIT. If death occurs prior to age 85, the death proceeds will
never be less than the sum of Purchase Payments received less: prior
Withdrawals, applicable Surrender Charges on prior Withdrawals and values
applied to the Partial Annuity Benefit. Every five years, we will adjust
the death proceeds to reflect increases in your Accumulation Account Value.
If death occurs on or after age 85 the death proceeds will equal the value
of the Accumulation Account. See DISTRIBUTIONS UNDER THE CONTRACT -- DEATH
PROCEEDS.

FEE TABLE
_________

The Fee Table is provided to assist you in understanding the various
charges and deductions that you will bear directly or indirectly. The Fee
Table reflects expenses under the Contract and of both the Separate Account
and the Oppenheimer Variable Account Funds. The Fee Table does not include
possible State Taxes. See Charges and Deductions in this Prospectus and
"How the Funds are Managed" in the prospectus for the Oppenheimer Variable
Account Funds.

OWNER TRANSACTION EXPENSES
<TABLE>
<CAPTION>

Percentage of Purchase Payment
<S> <C>
Sales Load at Time of Purchase 0%

Number of Years(1) Deferred sales load when Purchase Payment withdrawn
or surrendered
_________________ ___________________________________

1 6%
2 6%
3 5%
4 4%
5 3%
Thereafter 0%

Charge for Transfer None
</TABLE>

<REDLINE>
(1) Surrender Charges are based upon the number of years between the date
Purchase Payments are deemed to have been received and the date they
are withdrawn or surrendered. Purchase Payments received prior to
October 2, 1995, are deemed to have been received on the date of your
initial Purchase Payment. Additional Purchase Payments received
after October 2, 1995 will be deemed to be received on the date we
actually receive them.
<REDLINE>

<TABLE>

<S> <C>
ANNUAL CONTRACT FEE $30

</TABLE>

SEPARATE ACCOUNT ANNUAL EXPENSE
<TABLE>
<CAPTION>

Percentage of Average Accumulation Account
Value Allocated to Separate Account

<S> <C>
Mortality and Expense Risk Charge 1.25%
Administrative Fee 0.10%
_____
Total Separate Account Annual Expenses 1.35%
=====
</TABLE>

FUND ANNUAL CHARGES AND EXPENSES (as percentage of the average account
value)

Management Other Total
Fees Expenses Fund Annual Expenses(1)
<S> <C> <C> <C>
Oppenheimer Money Fund .45% .05% .50%
Oppenheimer High Income Fund .75% .06% .81%
Oppenheimer Bond Fund .75% .06% .81%
Oppenheimer Capital Appreciation Fund .75% .05% .80%
Oppenheimer Growth Fund .75% .06% .81%
Oppenheimer Multiple Strategies Fund .74% .05% .79%
Oppenheimer Global Securities Fund .75% .20% .95%
Oppenheimer Strategic Bond Fund .75% .18% .93%
</TABLE>

(1) Does not reflect expenses related to the Contract or Separate Account

HYPOTHETICAL EXAMPLES

THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES, ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

A. If you surrender your Contract at the end of the applicable
period, you would pay the following expenses on a $1,000
investment, assuming 5% annual return on assets:

Subaccount 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Money Fund $ 79.00 $ 109.00 $ 132.00 $ 220.00
High Income 82.00 119.00 147.00 252.00
Bond Fund 82.00 119.00 147.00 252.00
Capital Appreciation Fund 82.00 118.00 147.00 251.00
Growth Fund 82.00 119.00 147.00 252.00
Multiple Strategies 82.00 118.00 146.00 250.00
Global Securities Fund 87.00 123.00 155.00 267.00
Strategic Bond Fund 83.00 122.00 154.00 265.00

</TABLE>

B. If you do not surrender your Contract or if you annuitize, you would
pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:

Subaccount 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Money Fund $ 19.00 $ 59.00 $ 102.00 $ 220.00
High Income 22.00 69.00 117.00 252.00
Bond Fund 22.00 69.00 117.00 252.00
Capital Appreciation Fund 22.00 68.00 117.00 251.00
Growth Fund 22.00 69.00 117.00 252.00
Multiple Strategies 22.00 68.00 116.00 250.00
Global Securities Fund 24.00 73.00 125.00 267.00
Strategic Bond Fund 23.00 72.00 124.00 265.00

</TABLE>

For the purpose of calculating the expenses in the above examples, we have
converted the $30 Annual Contract Fee to a .03% annual asset charge based
on the $46,531 average size of Contracts. Converted in this way, the
Annual Contract Fee (on a percentage basis) would be higher for smaller
Contracts and lower for larger Contracts.

CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values
<REDLINE>
The condensed financial information was prepared by Confederation.
Confederation issued and administered the Contracts funded by the Separate
Account prior to the assumption reinsurance of the Contracts and the
transfer of the Separate Account to Aetna on October 2, 1995. See FACTS
ABOUT AETNA, THE SEPARATE ACCOUNT AND THE OPPENHEIMER VARIABLE ACCOUNT
FUNDS.
</REDLINE>

1990(1) 1991(2) 1992 1993(3) 1994
<S> <C> <C> <C> <C> <C>
Money Fund
Accumulation unit value
at beginning of period $10.00 $10.23 $10.72 $10.99 $11.19
at end of period $10.23 $10.72 $10.99 $11.19 $11.51
Accumulation Units outstanding 11,496.99 278,364.11 823,485.65 1,304,423.04 2,665,713.00

High Income Fund
Accumulation unit value
at beginning of period $10.00 $10.00 $11.80 $13.73 $17.11
at end of period $10.00 $11.80 $13.73 $17.11 $16.35
Accumulation units outstanding - 133,655.43 546,212.32 2,010,341.54 1,978,010.00

Bond Fund
Accumulation unit value
at beginning of period $10.00 $10.00 $11.07 $11.63 $12.97
at end of period $10.00 $11.07 $11.63 $12.97 $12.55
Accumulation units outstanding - 132,312.74 610,765.61 1,414,173.21 1,445,364.00

Capital Appreciation Fund
Accumulation Unit value
at beginning of period $10.00 $10.07 $15.37 $17.50 $21.98
at end of period $10.07 $15.37 $17.50 $21.98 $20.04
Accumulation Units Outstanding 3,511.36 163,873.92 718,400.83 1,662,361.45 2,402,122.00

Growth Fund
Accumulation Unit Value
at beginning of period $10.00 $10.13 $12.54 $14.17 $15.00
at end of period $10.13 $12.54 $14.17 $15.00 $14.94
Accumulation Units Outstanding 6,615.78 119,618.09 563,151.08 1,700,812.71 2,083,816.00

Multiple Strategies Fund
Accumulation Unit Value
at beginning of period $10.00 $10.11 $11.72 $12.60 $14.42

at end of period $10.11 $11.72 $12.60 $14.42 $13.95
Accumulation Units Outstanding 59.11 184,581.48 832,976.24 2,947,594.19 3,598,828.00

Global Securities Fund
Accumulation Unit Value
at beginning of period - $10.00 $10.55 $9.67 $16.25
at end of period - $10.55 $9.67 $16.25 $15.11
Accumulation Units Outstanding - 202,907.57 657,073.46 2,260,855.75 3,590,803.00

Strategic Bond Fund
Accumulation Unit Value
at beginning of period - - - $10.00 $10.33
at end of period - - - $10.33 $9.81
Accumulation Units Outstanding - - - 956,346.22 1,556,820.00

</TABLE>

(1) Period from April 1, 1990 to December 31, 1990
(2) For Global Securities Fund only, period from March 1, 1991
(inception) to December 31, 1991
(3) For Strategic Bond Fund only, period from May 1, 1993 (inception) to
December 31, 1993

FINANCIAL STATEMENTS

The Financial Statements for Aetna and the Separate Account are in
the Statement of Additional Information.

FACTS ABOUT AETNA, THE SEPARATE ACCOUNT AND
THE OPPENHEIMER VARIABLE ACCOUNT FUNDS

AETNA LIFE INSURANCE AND ANNUITY COMPANY

<REDLINE>
Aetna Life Insurance and Annuity Company is the depositor of the
Separate Account. Aetna was organized in 1976 as a stock life insurance
company under the insurance laws of the state of Connecticut. Through a
merger it succeeded to the business of Aetna Variable Annuity Life
Insurance Company. The latter Company had been doing business since 1954
as an Arkansas insurance company under the name Participating Annuity Life
Insurance Company. As of December 31, 1994, Aetna managed over $19.5
billion of assets, ranking it among the top 2% of all U.S. life insurance
companies by size. Aetna is a wholly-owned subsidiary of Aetna Life and
Casualty Company which, with its subsidiaries, constitutes one of the
nation's largest diversified financial services organizations. Our home
office is located at 151 Farmington Avenue, Hartford, Connecticut 06156.
We are currently qualified to do business as a life insurance company in
all 50 states and the District of Columbia. We are also registered as an
investment adviser under the 1940 Act and are registered with the National
Association of Securities Dealers, Inc. as a broker-dealer.
</REDLINE>

VARIABLE ANNUITY ACCOUNT G

The Separate Account was originally established by Confederation
pursuant to the laws of the State of Georgia on December 15, 1988. On
August 12, 1994 Confederation was placed in rehabilitation by the Fulton
County, Georgia Superior Court and ceased sales of new Contracts and
acceptance of additional Purchase Payments under existing in-force
Contracts. The rehabilitator of Confederation (the "Rehabilitator") sought
proposals for the acquisition of Confederation's stock, assets or
liabilities which would provide superior benefits to Confederation's
estate, including Confederation's policyholders. On May 3, 1995 the
Rehabilitator and Aetna entered into an Assumption Reinsurance Agreement
pursuant to which Confederation would transfer to Aetna and Aetna would
assume and accept from Confederation the liabilities arising under the
Contracts and the assets funding the Contracts, including the Separate
Account.

<REDLINE>
Pursuant to the Assumption Reinsurance Agreement, the Separate
Account was transferred intact to Aetna on October 2, 1995 and re-

established by us as Variable Annuity Account G of Aetna Life Insurance and
Annuity Company pursuant to the laws of the state of Connecticut. The
Separate Account is a unit investment trust registered with the SEC under
the 1940 Act and it meets the definition of a "separate account" under
Federal securities laws. This does not involve any supervision by the SEC
of the management or investment policies or practices of the Separate
Account.
</REDLINE>

Although Aetna holds title to the assets of the Separate Account,
such assets are not chargeable with liabilities arising out of any other
business we may conduct. Income, gains or losses of the Separate Account
are credited to or charged against the assets of the Separate Account
without regard to other income, gains or losses of the Company. As a
result, the investment performance of the Separate Account is entirely
independent of the investment performance of the General Account or any
other separate account maintained by us. All obligations of Aetna arising
under the Contracts are its general corporate obligations.

The Separate Account currently has eight Subaccounts: the Money Fund;
the High Income Fund; the Bond Fund; the Capital Appreciation Fund; the
Growth Fund; the Multiple Strategies Fund; the Global Securities Fund; and
the Strategic Bond Fund.

THE OPPENHEIMER VARIABLE ACCOUNT FUNDS AND INVESTMENT ADVISER
<REDLINE>
Currently, each Subaccount of the Separate Account invests
exclusively in corresponding portfolios of the Oppenheimer Variable Account
Funds (each portfolio a "Fund"). The Oppenheimer Variable Account Funds
was first organized as a Massachusetts business trust in 1984. The
Oppenheimer Variable Account Funds was registered with the SEC as a
diversified, open-end management investment company under the 1940 Act.
Oppenheimer Management Corporation is the Investment Adviser ("Adviser") of
the Oppenheimer Variable Account Funds. The Adviser is owned by
Oppenheimer Acquisition Corp., a holding company owned in part by senior
management of the Adviser and ultimately controlled by Massachusetts Mutual
Life Insurance Company. Additional information on each Fund can
be found in the Oppenheimer Variable Account Funds prospectus.
</REDLINE>

The investment objectives and policies of the eight Funds of the
Oppenheimer Variable Account Funds are summarized below.

Oppenheimer Money Fund -- seeks the maximum current income from
investments in "money market" securities consistent with low capital risk
and maintenance of liquidity. An investment in this Fund is neither
insured nor guaranteed by the U.S. government, and there is no assurance
that this Fund will be able to maintain a stable net asset value of $1.00
per share.

Oppenheimer High Income Fund -- seeks a high level of current income
from investment in high yield fixed-income securities, including unrated or
high risk securities in the lower rating categories, commonly known as
"junk bonds," which are subject to a greater risk of loss of principal and
nonpayment of interest than higher-rated securities. These securities may
be considered speculative.

Oppenheimer Bond Fund -- primarily seeks a high level of current
income from investment in high yield fixed-income securities rated "Baa" or
better by Moody's or "BBB" or better by Standard & Poor's. Secondarily,
this Fund seeks capital growth when consistent with its primary objective.

Oppenheimer Capital Appreciation Fund -- seeks to achieve capital
appreciation by investing in "growth-type" companies.

Oppenheimer Growth Fund -- seeks to achieve capital appreciation by
investing in securities of well-known established companies.

Oppenheimer Multiple Strategies Fund -- seeks a total investment
return (which includes current income from and capital appreciation on the
value of its investments) from common stocks and other equity securities,
bonds and other debt securities, and "money market" securities.

Oppenheimer Global Securities Fund -- seeks long-term capital
appreciation by investing a substantial portion of assets in securities of
foreign issuers, "growth-type" companies, cyclical industries and special
situations which are considered to have appreciation possibilities.
Current income is not an objective. These securities may be considered
speculative.

<REDLINE>
Oppenheimer Strategic Bond Fund -- seeks a high level of current
income principally derived from interest on debt securities and seeks to
enhance such income by writing covered call options on debt securities.
The Fund intends to invest principally in (a) foreign government and
corporate debt securities, (b) U.S. Government securities, and (c) lower-
rated high yield domestic debt securities, commonly known as "junk bonds,"
which are subject to a greater risk of loss of principal and nonpayment of
interest than higher-rated securities. These securities may be considered
speculative.
</REDLINE>

There is no assurance that a Fund will achieve its investment
objectives. You bear the full investment risk of an investment in a Fund.
Additional information concerning each Fund, its potential risks and its
fees and expenses can be found in the accompanying current prospectus for
the Oppenheimer Variable Account Funds. Additional copies of the
Oppenheimer Variable Account Funds Prospectus may be obtained by writing or
calling our Home Office. You should read the Oppenheimer Variable Account

Funds Prospectus before making any decision to allocate monies to a
Subaccount.

Resolving Material Conflicts

Because the Oppenheimer Variable Account Funds offers shares to the
separate accounts of other insurance companies and may offer shares to our
other separate accounts, a material conflict may arise between the
interests of the Separate Account and one or more other separate accounts
investing in the Oppenheimer Variable Account Funds. The Board of Trustees
of the Oppenheimer Variable Account Funds has agreed to monitor events in
order to identify any material conflicts and to determine what action, if
any, should be taken in response. We will take all steps we believe are
necessary to protect the Separate Account.

Changes and Substitutions of Funds

We reserve the right to add or eliminate a Fund and substitute shares
held by a Subaccount for another portfolio of the Oppenheimer Variable
Account Funds or for another registered open-end management investment
company as permitted by the 1940 Act. To the extent required by the 1940
Act, substitutions of shares attributable to your interest in a Subaccount
will not be made until you have been notified of the change.

If deemed to be in the best interests of persons having voting rights
under the Contracts and subject to any approvals that may be required under
applicable law, the Separate Account may be: (1) operated as a management
company under the 1940 Act, or any other form permitted by law; (2)
deregistered under the 1940 Act in the event such registration is no longer
required; (3) combined with one or more other separate accounts; or (4)
changed in other respects.

THE CONTRACT

The Contract described in this Prospectus is an individual deferred
variable annuity which was established with an initial Purchase Payment and
allows for additional Purchase Payments if you so choose.

PARTIES TO THE CONTRACT

Owner

As the purchaser of the Contract, you may exercise all rights and
privileges provided in the Contract, subject to any rights that you, as
Owner, may convey to an irrevocable beneficiary. Joint ownership is not
allowed.

Annuitant

The Annuitant is the person you designate to receive Income Payments
and on whose life these payments are based. At the time you elect an
Annuity Option, you may elect to name a joint Annuitant. See ANNUITY
BENEFIT -- ANNUITY OPTION.

Beneficiary

The Beneficiary is the person you designate to receive the death
proceeds. See DISTRIBUTIONS UNDER THE CONTRACT -- DEATH PROCEEDS. If no
Beneficiary is living at that time, the death proceeds are payable to your
estate. If the Annuitant dies after the Annuity Date, the Beneficiary is
the person who will receive any remaining guaranteed payments under an
Annuity Option. If no Beneficiary is living at that time, the remaining
guaranteed payments are payable to the estate of the Annuitant.

Change of Annuitant or Beneficiary

Prior to the Annuity Date, you may change the Annuitant or
Beneficiary by submitting a written request to our Home Office. After the
Annuity Date only a change of Beneficiary may be made. Any change will
become effective on the date you sign the request. However, any change
will be subject to any payment or other action taken by us before we record
the change. If the Owner is not a natural person, under current Federal
tax law, the Surrender Value must be distributed upon any change of the
Annuitant or the death of the Annuitant. See FEDERAL TAX MATTERS.

PURCHASE PAYMENTS AND ALLOCATING YOUR PURCHASE PAYMENTS

No new Contracts are being issued. You may make additional Purchase
Payments under the Contract prior to the date all your Accumulation Account
has been annuitized. Additional Purchase Payments must be at least $100.
There is no limit on the number of additional Purchase Payments you may
make. Each additional Purchase Payment will be subject to our requirements
at that time. We reserve the right to modify the requirements.

If imposed by the state or municipality in which you reside, State
Taxes will be deducted from each Purchase Payment and the remaining amount
is known as the Net Purchase Payment. See CHARGES AND DEDUCTIONS -- STATE
TAXES. Allocations to the funding options of additional Net Purchase
Payments will be made based upon your allocation instructions in your
application unless we receive a written notice with new instructions. See
THE CONTRACT -- ALLOCATION CHANGES. Additional Net Purchase Payments will
be credited to the Accumulation Account on the Valuation Date the Purchase
Payment is received at our Home Office.

Under our bank draft investing program, additional Purchase Payments
may also be made by monthly drafts against your financial institution
checking account. To authorize these drafts, you must complete and return

to us a special bank draft authorization form which may be obtained from
our Home Office.

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All Purchase Payments on Qualified Contracts must comply with
applicable provisions of the Code and your retirement plan, if any.
Additional Purchase Payments commingled in an individual retirement annuity
with a rollover contribution from other retirement plans may result in
unfavorable tax consequences. You should consult your tax advisor.
</REDLINE>

VALUE OF THE ACCUMULATION ACCOUNT AND UNIT VALUE

The total value of your Contract, known as the Value of the
Accumulation Account, equals your value in all the Subaccounts plus your
value in the Fixed Account. Generally, if the net asset value of a Fund
increases or decreases, so does the value in the corresponding Subaccount.
The Accumulation Account reflects the total of all increases and decreases
in the Subaccounts in which you have an interest. Your value in any given
Subaccount is determined by multiplying the Unit Value for the Subaccount
by the number of Units you own.

If you allocate amounts to a Subaccount, Aetna will purchase shares
of the corresponding Fund on behalf of the Subaccount and hold those shares
in the Subaccount. We will credit your Accumulation Account with Units of
the Subaccount. The number of Units will be determined by dividing the
amount allocated to the Subaccount by the Unit Value of the Subaccount for
the Valuation Period during which the amount was allocated.

The Unit Value in each Subaccount was initially set at $10.
Thereafter, the Unit Value for each Subaccount at the end of any Valuation
Period is calculated by multiplying the Unit Value at the end of the prior
Valuation Period by the net investment factor of the Subaccount for the
then current Valuation Period.

The net investment factor for each Subaccount for any Valuation Period is
equal to (A / B) - C,

where

A is the net result of:

(1) the net asset value per share of the Fund shares held in the
Subaccount, determined at the end of the current Valuation
Period; plus

(2) the per share amount of any dividend and capital gains
distributions made by the Fund if the "ex-dividend" date occurs
during the current Valuation Period; plus or minus

(3) a charge or credit, if any, for taxes.

B is the net result of:

(1) the net asset value per share of the Fund shares held in the
Subaccount determined as of the end of the immediately
preceding Valuation Period; plus or minus

(2) a charge or credit, if any, for taxes.

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C represents a daily deduction for the Mortality and Expense Risk Charge
and the Administration Fee of .0037%. The Mortality and Expense Risk
Charge and the Administration Fee are equal to an annual rate of 1.35% of
the daily asset value of the Subaccount. This percentage represents a
1.25% charge for the mortality and expense risk assumed, and a .10% charge
for the Administration Fee. The daily deduction can result in a decrease
of the Unit Value even if the Fund's net asset value per share increases.
See CHARGES AND DEDUCTIONS.
</REDLINE>

The net investment factor may be greater or less than one. Therefore, the
Unit Value for a Subaccount may increase or decrease from one Valuation
Period to the next Valuation Period.

ALLOCATION CHANGES

You may change the allocation of additional Net Purchase Payments among the
Subaccounts and the Fixed Account. There is no limit to the number of
changes you may make to your allocations. Allocations must be in whole
percentages of not less than 10%. The sum of the amounts which may be
allocated to the Fixed Account over the life of the Contract is limited to
$250,000. See APPENDIX A -- THE FIXED ACCOUNT.

TRANSFERS

Prior to the Annuity Date, you may make unlimited Transfers among the
Subaccounts and into and out of the Fixed Account subject to certain rules.
See APPENDIX A -- THE FIXED ACCOUNT. There are presently no fees for
Transfers nor are any taxes due. However, we reserve the right to charge a
fee for Transfers in excess of 12 per Contract Year or to limit the number
of Transfers to 12 per Contract Year.

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Transfers may be made by written request. Transfers may also be made
by telephone, providing telephone transfers have been specifically

authorized. To make telephone Transfers, call 1-800-531-4547. Telephone
Transfers into or out of the Fixed Account are not permitted. Transfer
requests must be received at our Home Office prior to 4:00 pm Eastern Time
in order to be processed on the same Valuation Date. We reserve the right
to reject telephone or written requests submitted in bulk on behalf of ten
or more Contracts and to otherwise limit, deny or terminate telephone
transfers. See MISCELLANEOUS -- TELEPHONE TRANSFERS.
</REDLINE>

The minimum amount which may be transferred at any one time is the
lesser of $500 or your interest in the Fixed Account or the Subaccount from
which the Transfer is made. Under our Dollar Cost Averaging program,
however, the minimum amount for Transfers is $50 per Subaccount. See THE
CONTRACT -- DOLLAR COST AVERAGING. The sum of the amount which can be
allocated to the Fixed Account over the life of the Contract is limited to
$250,000. See APPENDIX A -- THE FIXED ACCOUNT.

DOLLAR COST AVERAGING

Our Dollar Cost Averaging program, allows you to regularly transfer
amounts from the Money Fund Subaccount to one or more other Subaccounts.
This results in the purchase of more Units when the Unit Value is low and
fewer Units when the Unit Value is high. Therefore, the purchase of Units
under Dollar Cost Averaging in a rising or falling market will result in
your average cost per Unit being less than the average price per Unit.

For example, assume that you request $60 per month be transferred
from the Money Fund Subaccount to the Growth Fund Subaccount. The
following table illustrates the effect of Dollar Cost Averaging over a
four-month period.

Transfer Unit Value Units
Month Amount ("Price") Purchased

1 $60 $2 30
2 60 3 20
3 60 4 15
4 60 5 12

The average price per Unit for these purchases is the sum of the prices
divided by the number of monthly Transfers ($14 / 4), which equals $3.50.
The average cost per Unit that you would pay for these purchases is the
total amount transferred divided by the total number of Units purchased
($240 / 77), which equals $3.12. The table is illustrative only and not
representative of past or future results.

Under our Dollar Cost Averaging program we will automatically
transfer an amount you specify from your value of the Money Fund Subaccount

into other Subaccounts on a monthly basis. Each Transfer to a Subaccount
must be at least $50.00. At the time you elect to participate in the
Dollar Cost Averaging program, the value of your Money Fund Subaccount must
be equal to at least 12 monthly Transfers. Transfers to the Fixed Account
are not permitted under the Dollar Cost Averaging program.

After we process your request we will Transfer the amount from your
value of the Money Fund Subaccount to the Subaccount or Subaccounts you
select on the fifteenth day of each calendar month or if the fifteenth is
not a Valuation Date, the next Valuation Date. There is no charge for this
program. You may discontinue the monthly Transfers by sending a written
request to us.

There is no guarantee that the Dollar Cost Averaging program will
result in Contract values that equal or exceed any Payments made or any
other advantage or benefit.

QUESTIONS

Owner inquiries about the Contract or any procedures should be
addressed to:

Aetna Life Insurance and Annuity Company
Strategic Markets and Products
151 Farmington Avenue
Hartford, Connecticut 06156
1-800-531-4547

All communications must include the Contract number and the names of
the Owner and the Annuitant.

CHARGES AND DEDUCTIONS

SURRENDER CHARGES

We do not deduct sales charges from Purchase Payments at the time of
investment. However, a Surrender Charge, as described below, may be
assessed against Withdrawals or a Surrender. The Surrender Charge covers
certain expenses incurred relating to the sale of the Contract including
commissions to registered representatives and promotional expenses.
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Surrender Charges are based upon the number of years between the date
Purchase Payments are deemed received and the date they are Withdrawn or
Surrendered:

(a) Purchase Payments made prior to October 2, 1995 (the day Aetna
assumed the Contract) are deemed to have been received on the
date of receipt of your initial Purchase Payment.

(b) Purchase Payments received by us after October 2, 1995 are
deemed received on the date we actually receive the Purchase
Payment.
</REDLINE>

The Surrender Charge is a percentage of the amount of each Purchase
Payment withdrawn or surrendered and equals:

Years Since Purchase
Payment Deemed Received Charge

1 6%
2 6%
3 5%
4 4%
5 3%
Thereafter 0%

No Surrender Charge is imposed against:

(a) That portion of a Surrender which does not exceed 10% of
current Value of the Accumulation Account, providing that there
has been no prior Withdrawal in the same Contract Year.

(b) That portion of your first Withdrawal in a Contract Year which
does not exceed 10% of the current Value of the Accumulation
Account.

(c) Any portion of the Accumulation Account which is applied under
the Partial Annuity Benefit. See ANNUITY BENEFIT -- PARTIAL
ANNUITY BENEFIT.

(d) Withdrawals made under our Systematic Withdrawal Program. See
DISTRIBUTIONS UNDER THE CONTRACT -- SYSTEMATIC WITHDRAWAL.

(e) The Value of the Accumulation Account upon Annuitization.

(f) Any amounts withdrawn or surrendered in excess of Purchase
Payments.

(g) Any distribution made as the result of the death of the Owner.

Purchase Payments will be deemed to be withdrawn or surrendered in
the order in which they were deemed received. All Withdrawals and
Surrenders will be deducted first from Purchase Payments and then from
amounts in excess of Purchase Payments.

In the case of a Withdrawal, the Surrender Charge is deducted from
the Accumulation Account as an additional withdrawal. In the event that
your request for a Withdrawal specifies the Subaccounts and/or the Fixed

Account from which the Withdrawal is to be made, the Surrender Charge will
be deducted equally from such Subaccounts and/or the Fixed Account.
Otherwise, the Surrender Charge will be deducted proportionally based on
your value in each Subaccount. If you Surrender your Contract, the
Surrender Charge is deducted from the total amount to be paid to you.

MORTALITY AND EXPENSE RISK CHARGE

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Aetna deducts a Mortality and Expense Risk Charge from your value in
each Subaccount equal to, on an annual basis, 1.25% of the daily asset
value of which approximately .95% is attributable to mortality risks and
approximately .30% is attributable to expense risk . The mortality risks
assumed by the Company arise from its contractual obligations (i) to make
annuity payments after the Annuity Date for the life of the Annuitant(s),
and (ii) to provide the death benefit that may be higher than the value of
the Accumulation Account. The expense risk assumed by the Company is that
the costs of administering the Contracts and the Separate Account will
exceed the amount recovered from the Administrative Fee. The Mortality and
Expense Risk Charge may be used to cover distribution expenses of the
Contracts because we do not believe the Surrender Charge will be
sufficient. See CHARGES AND DEDUCTIONS -- SURRENDER CHARGE. This charge
is guaranteed by the Company and cannot be increased.
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ADMINISTRATION FEE

A daily charge is deducted from your value in each Subaccount equal
to, on an annual basis, .10% of the daily asset value. This fee is
intended only to reimburse us for administrative expenses. We do not
expect to recover an amount in excess of our accumulated expenses through
the deduction of the Administration Fee. We reserve the right to change
this fee in the future.

ANNUAL CONTRACT FEE

On each Contract anniversary on or before the Annuity Date we will
deduct a $30.00 Annual Contract Fee for the previous Contract Year from
your Accumulation Account. The fee is intended to partially reimburse us
for costs of maintaining the Contracts, the Separate Account and the Fixed
Account. If the Contract is surrendered or annuitized, we will deduct the
Annual Contract Fee at the time of Surrender or Annuitization for the
current Contract Year. The deduction will be made pro rata from your value
in each Subaccount and the Fixed Account. The Annual Contract Fee is not
expected to result in a profit to Aetna. We guarantee that this charge
will not be increased.

STATE TAXES

State Taxes are taxes imposed by certain jurisdictions: (i) at the
time Purchase Payments are received; (ii) from values applied to an Annuity
Option; or (iii) from Withdrawals or Surrenders. We will deduct State
Taxes when we determine the tax is due.

These taxes currently range from 0 to 3.5%. The amount of any such
tax will depend on, among other things, your state of residence, and the
status of Aetna and the insurance laws of that state. These taxes are
subject to change and your tax advisor should be consulted for current
information.

OTHER TAXES

We do not expect to incur any Federal or state income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the Contracts. Based upon these expectations, no charge is
being made currently to the Separate Account for Federal or state income
taxes which may be attributable to the Separate Account.

We will periodically review the need for a charge to the Separate
Account for Federal or state income taxes. Such a charge may be made in
future years for any Federal or state income taxes incurred by us with
respect to the Separate Account or for the economic effect of any such
taxes. In the event that we should incur Federal or state income taxes
attributable to investment income or capital gains retained as part of the
reserves under the Contract, the Accumulation Account of the Contract would
be correspondingly adjusted for any provision or charge for such taxes.

Under present laws, we incur state and local taxes (in addition to
the State Taxes described above), in several states. At present, we do not
charge for these. Charges for such taxes may be made in the future.

FUND EXPENSES

The value of the assets in the Separate Account will reflect the
value of the Funds as well as the fees and expenses of each Fund. A
complete description of the expenses and deductions for each Fund is found
in the accompanying Oppenheimer Variable Account Funds prospectus.

DISTRIBUTIONS UNDER THE CONTRACT

WITHDRAWALS

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Prior to the Annuity Date, you may request a Withdrawal from any
portion or all of your Accumulation Account subject to any Surrender
Charges or any required tax withholding or penalty. You may be subject to
a penalty tax for an early withdrawal. See CHARGES AND DEDUCTIONS --

SURRENDER CHARGES; FEDERAL TAX MATTERS -- OTHER TAX CONSIDERATIONS --
Penalty Tax on Certain Distributions.
</REDLINE>

Withdrawals must be made by written request. Your Withdrawal request
may specify the amount of the withdrawal or surrender to be deducted from
each Subaccount or from the Fixed Account; otherwise we will withdraw the
amount requested pro rata from your value in each Subaccount and the Fixed
Account. The minimum amount which can be withdrawn is the lesser of $500
or your value in the Subaccounts specified or the Fixed Account. The
maximum amount which may be withdrawn from the Fixed Account is limited.
See APPENDIX A -- THE FIXED ACCOUNT.

Except for New York residents, we reserve the right to consider any
Withdrawal that would reduce the Value of the Accumulation Account to less
than $2,000 to be a request for Surrender. In this event, the Surrender
Value will be paid to you and the Contract will terminate. See
DISTRIBUTIONS UNDER THE CONTRACT -- SURRENDER VALUE.

SYSTEMATIC WITHDRAWAL

To the extent permitted by your plan and the Code, under the
Systematic Withdrawal program, you may make regularly scheduled Withdrawals
from your Accumulation Account. See FEDERAL TAX MATTERS. To elect a
Systematic Withdrawal, your value of your Accumulation Account must have
been at least $12,000. You may not elect this program if you have taken a
prior Withdrawal during the same Contract Year. The program allows you to
prearrange the Withdrawal of a specified dollar amount of at least $100 per
Withdrawal, on a monthly, quarterly or semi-annual payment basis. The
maximum amount that may be withdrawn each Contract Year is 10% of the Value
of the Accumulation Account as of the previous year end. Surrender Charges
are not imposed on Withdrawals under this program. See CHARGES AND
DEDUCTIONS -- SURRENDER CHARGES. While you are receiving Systematic
Withdrawals, you may not elect to make additional Purchase Payments under
our bank draft investing program or to allocated amounts to the Subaccounts
under our Dollar Cost Averaging Program. See THE CONTRACT -- PURCHASE
PAYMENTS AND ALLOCATING YOUR PURCHASE PAYMENTS; -- DOLLAR COST AVERAGING.

Systematic Withdrawals will begin on the first scheduled Withdrawal
date selected by you following the date we process your request. You
should receive Withdrawal payments by the fifteenth (15th) of the
applicable month. Withdrawals will be deducted pro rata from your value in
each Subaccount and the Fixed Account.

You may modify or discontinue your Systematic Withdrawal program at
any time by sending a written request to us. We reserve the right to
discontinue or modify the Systematic Withdrawal program by providing you
with 30 days' prior written notice. Such discontinuation would not affect
any Systematic Withdrawal program you currently have in effect. We also

reserve the right to assess a processing fee for the program although we do
not currently do so.

All parties to the Contract are cautioned that the rights of any person to
implement the Systematic Withdrawal program under Qualified Contracts may
be subject to the terms and conditions of the applicable provisions of the
Code and of the retirement plan, if any, regardless of the terms and
conditions of the Qualified Contract.

SURRENDER

Prior to the Annuity Date, you may Surrender the Contract for the
Surrender Value subject to any Surrender Charges or required tax
withholding or penalty. See CHARGES AND DEDUCTIONS -- SURRENDER CHARGES
AND FEDERAL TAX MATTERS -- OTHER TAX CONSIDERATIONS. You must submit a
written request for Surrender and return the Contract to us. The Surrender
Value will be based on the Unit Values at the end of the Valuation Period
during which the Surrender request is received.

You may receive the Surrender Value as a lump sum payment or apply it
under one of the Annuity Options. See ANNUITY BENEFIT -- ANNUITY OPTIONS.
No Surrender Charge will be imposed on any amount being surrendered which
is applied under an Annuity Option. See CHARGES AND DEDUCTIONS --
SURRENDER CHARGES.

Surrender Value

The Surrender Value of your Contract varies each day depending on the
investment results of the Subaccounts you have selected. We cannot guaran-
tee any minimum amount of Surrender Value except for any amount you have
allocated to the Fixed Account.

The Surrender Value is equal to the value of your Accumulation
Account minus Surrender Charges and State Taxes, if any, and the Annual
Contract Fee for the current Contract Year. See CHARGES AND DEDUCTIONS.

DEATH PROCEEDS

Death proceeds are paid to your Beneficiary in the event any amounts
remain in your Accumulation Account at the time of your death because you
have not applied all your Accumulation Account to one or more Annuity
Options.

If you die prior to age 85, the death proceeds are equal to the
greatest of: (i) the sum of your Purchase Payments less prior Withdrawals,
applicable Surrender Charges on prior Withdrawals, and values applied to
the Partial Annuity Benefit; (ii) the Value of the Accumulation Account; or
(iii) the last established adjusted death benefit described below, plus
Purchase Payments, and less Withdrawals, applicable Surrender Charges on
Withdrawals and values applied to the Partial Annuity Benefit occurring

since the last adjusted death benefit was established. The adjusted death
benefit will be established every five years starting with the fifth
Contract anniversary and will equal the Value of the Accumulation Account
on that Contract anniversary.

If you die on or after age 85, the death proceeds are equal to the
Value of the Accumulation Account.

If you commit suicide within two years from the date of issue and
prior to the Annuity Date, the death proceeds are equal to the Value of the
Accumulation Account.

The death proceeds are calculated on the earlier of: (i) the date we
receive proof of death and the Beneficiary makes an election as to an
Annuity Option or a lump sum payment; or (ii) 60 days after our receipt of
proof of death. See DISTRIBUTIONS UNDER THE CONTRACT -- PAYMENT.

The Beneficiary may elect to receive the death proceeds under any
Annuity Option or as a lump sum payment. See ANNUITY BENEFIT -- ANNUITY
OPTIONS. If the Beneficiary does not elect an Annuity Option or a lump sum
payment within 60 days after we have received proof of death, proceeds will
be paid in a series of Income Payments, for as long as the Beneficiary is
living, with payments guaranteed for ten years. However, if the life
expectancy of the Beneficiary as of the date of your death is less than ten
years, the death proceeds will be paid in a series of Income Payments for
as long as the Beneficiary is living, with payments guaranteed for five
years.

If the Contract is a Non-Qualified Contract and your spouse is the
Beneficiary, your spouse can elect to receive either the death proceeds or
assume Contract ownership and continue the Contract as if you had not died.
See FEDERAL TAX MATTERS.

PAYMENT

Payment of any Withdrawal, Surrender, or lump sum death proceeds from
the Separate Account will usually occur within seven days from the date we
receive a request in good order. We may be permitted to defer such payment
if: (i) the New York Stock Exchange is closed for other than usual weekends
or holidays, or trading on the Exchange is otherwise restricted; (ii) an
emergency exists as defined by the SEC or the SEC requires that trading be
restricted; or (iii) the SEC permits a delay for protection of Owners.

We may defer payment of any Withdrawal or Surrender from the Fixed
Account for up to six months from the date we receive your written request.

Because you assume the investment risk with respect to amounts
allocated to the Separate Account and because certain Surrenders are
subject to the Surrender Charge, the total amount paid upon Surrender of
the Contract may be more or less than the total Purchase Payments made.

ANNUITY BENEFIT

ANNUITIZATION

Annuitization allows you to apply some or all of your Accumulation
Account to an Annuity Option that will provide a series of fixed Income
Payments. The date an Annuity Option becomes effective is the Annuity Date
for that option. If you elect a partial annuity you will have more than
one Annuity Date.

PARTIAL ANNUITY BENEFIT

After the first Contract Year you may withdraw a portion of your
Accumulation Account, free of Surrender Charge, to purchase a single
premium immediate annuity issued by us or one of our affiliates. The value
is withdrawn as of the Annuity Date. The remaining portion of your
Accumulation Account continues to accumulate in the Fixed Account and the
Subaccounts you have selected. The Partial Annuity Benefit cannot be
elected by residents of New York.

The Partial Annuity Benefit must be elected in writing and the
minimum amount which may be annuitized is $10,000. You may not elect the
Partial Annuity Benefit if it will reduce the value of your Accumulation
Account to less than $2,000, or if the annual Income Payment would be less
than $100. Unless you specify otherwise, we will withdraw the annuitized
amount pro rata from your Accumulation Account Value in each Subaccount and
the Fixed Account. The maximum amount that may be withdrawn from the Fixed
Account each calendar year to apply to a Partial Annuity Benefit is
limited. See APPENDIX A -- THE FIXED ACCOUNT.

ANNUITY DATE

Unless elected otherwise, the Annuity Date for any amounts not
previously annuitized will be the later of the 10th Contract anniversary or
the Contract anniversary nearest the 65th birthday of the Annuitant. All
amounts must be annuitized by the Contract anniversary nearest the 85th
birthday of the Annuitant.

You may change the Annuity Date by written request at least 30 days
before both the previously selected Annuity Date and the new Annuity Date.
Without our approval, the new Annuity Date cannot be earlier than the tenth
Contract anniversary if the Annuitant's age is 75 years or less on the
Contract Date or later than the Contract anniversary nearest the
Annuitant's 85th birthday. In addition, for Qualified Contracts, certain
provisions of your retirement plan and/or the Code may further restrict
your choice of an Annuity Date. See FEDERAL TAX MATTERS.

ANNUITY OPTIONS

The Annuity Value will be paid in the form of a fixed annuity
according to the Annuity Option you choose. Federal income tax laws may
restrict the availability of certain Annuity Options for certain Qualified
Contracts. See FEDERAL TAX MATTERS. Upon commencement of Income Payments
you are not permitted to change your Annuity Option.

In the event that you have not chosen an Annuity Option, we will make
Income Payments to the Annuitant during the lifetime of the Annuitant with
payments guaranteed for ten years.

Option 1. Annuity Certain -- We will make equal payments to the
Annuitant for a guaranteed term which cannot be less than five years nor
more than 30 years. If the Annuitant dies before the end of the guaranteed
term, payments will continue to be made to the Beneficiary for the duration
of the guaranteed term.

Option 2. Life Only or Life with Term Certain -- We will make equal
payments to the Annuitant during the lifetime of the Annuitant. An
election may be made to guarantee payments for a term of 10 or 20 years.
If the Annuitant dies before the end of any guaranteed term, payments will
continue to the Beneficiary for the duration of that term. If no
guaranteed term is selected, payments will be made only while the Annuitant
is living. Therefore, it is possible that only one payment will be made if
the Annuitant dies before the second payment.

Option 3. Joint and Survivor Annuity -- We will make payments to the
Annuitant or joint Annuitant while either of them is living. A joint
Annuitant must be named at the time this option is chosen. The age and sex
of both the Annuitant and joint Annuitant will be used to determine
payments. If one Annuitant dies, payments will continue to the surviving
Annuitant. Payments will cease upon the death of the Annuitant last to
die. Therefore, it is possible that only one payment will be made if both
Annuitants die before the second payment.

In addition to these options, you may choose any other Annuity Option
agreed upon by us.

INCOME PAYMENTS

Income Payments will be based upon the Annuity Option selected, the
age and sex of an Annuitant when payments begin, the frequency of payments
and any scheduled changes in the amount of Income Payments.

At the time an Annuity Option becomes effective, we will require
proof of the age and sex of the Annuitant and any joint Annuitant. The age
used to calculate payments under an Annuity Option will be the Annuitant's
age as of the Annuitant's nearest birthday on the Annuity Date. From time
to time, we may require proof that the Annuitant or Beneficiary is living
when payment is contingent upon the survival of such person.

At the time the Annuity Option commences, payments will be calculated
on a fixed basis using the greater of: (i) the rates guaranteed in the
Contract; or (ii) more favorable rates which we then offer to this class of
Contracts.

You may elect payments to be made to the Annuitant on an annual,
semi-annual, quarterly or monthly basis, provided each payment is at least
$100. If the value of your Accumulation Account is less than $2,000 or
your payment on an annual basis is less than $100, we will pay the Annuity
Value as a single sum. Such payment will be in full settlement and will
terminate this Contract.

FEDERAL TAX MATTERS

INTRODUCTION

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THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX
ADVICE. This summary does not address all of the tax consequences of
ownership of a Contract or of distributions under a Contract. You should
consult your tax advisor in order to understand the tax consequences of any
transaction. This summary is based upon our understanding of the existing
federal income tax laws as they are currently interpreted by the Internal
Revenue Service. No representation is made as to the likelihood of the
continuation of the existing federal income tax laws or of their current
interpretation by the Internal Revenue Service. Additionally, no attempt
has been made to consider any applicable state or other laws.
</REDLINE>

This summary assumes that Qualified Contracts are used to provide
benefits to individual participants under certain retirement plans which
qualify for special federal income tax treatment under sections 219, 401,
403 or 408 of the Code. The ultimate effects of federal income taxes on
the Value of the Accumulation Account, on Income Payments, and on the
economic benefits provided to you, the Annuitant, or the Beneficiary under
the Contract depend on the type of retirement plan under which a Contract
is purchased, on the tax and employment status of the individual concerned,
and on our tax status.

AETNA'S TAX STATUS

Aetna is taxed as a life insurance company under Part 1 of Subchapter
L of the Code. Because the Separate Account is not a separate entity, and
its operations form a part of Aetna's business, the Separate Account will
not be taxed separately.

Investment income and net capital gains realized on the sale or
exchange of the assets of the Separate Account will be reinvested and taken
into account in determining the Unit Value. Under existing federal income

tax laws, the investment income and net capital gains of the Separate
Account will not be taxed to the extent that these items are retained as
part of the reserves under the Contract. However, if Aetna incurs any
federal income taxes attributable to the Separate Account, we reserve the
right to make a charge to the Separate Account for the payment of such
taxes.

TAXATION OF ANNUITY CONTRACTS IN GENERAL

Increases in the Accumulation Account

Section 72 of the Code governs the taxation of annuity contracts. An
Owner who is a natural person generally is not taxed on increases in the
Accumulation Account until some form of distribution occurs. The
assignment, pledge, or agreement to assign or pledge any portion of the
Accumulation Account, or the application of a portion of your Accumulation
Account to the Partial Annuity Benefit, generally will be treated as a
distribution to you. The taxable portion of such a distribution is taxed
as ordinary income.

If an Owner is not a natural person, then the Owner generally must
include in gross income any increase in the excess of the value of the
Contract over the Owner's "investment in the Contract" during the taxable
year. Certain exceptions to this rule may apply and should be discussed
with your tax advisor.

Distributions Received Prior to the Annuity Date

Amounts received before the Annuity Date pursuant to a Withdrawal or
Surrender under a Non-Qualified Contract generally are treated as taxable
income to the extent that the value of the Contract immediately before the
Withdrawal exceeds the "investment in the Contract" at that time. Any
additional amount withdrawn is not taxable. In the case of a Withdrawal or
Surrender under a Qualified Contract a portion of the amount received is
taxable based on the ratio of the "investment in the Contract" to the
individual's balance in the retirement plan, which is generally the value
of the Contract.

The "investment in the Contract" generally equals the total amount of
any Purchase Payments made by or on behalf of an individual under a
Contract that were not excluded from the gross income of the individual.
For Qualified Contracts, the "investment in the Contract" will often be
zero.

Income Payments

In general, there is no tax on that portion of each Income Payment
which represents the same ratio that the "investment in the Contract" bears

to the total expected value of the Income Payments for the term of the
payments. After the "investment in the Contract" is recovered, the full
amount of additional Income Payments, if any, is taxable.

Death Proceeds

Death proceeds which are distributed in a lump sum are taxed in the
same manner as the proceeds of a Surrender of the Contract. Death proceeds
distributed under an annuity option are taxed in the same manner as Income
Payments.

In order for a Non-Qualified Contract to be treated as an annuity
contract for federal income tax purposes, section 72(s) of the Code
generally requires the Contract to provide that (a) if the Owner dies on or
after the Annuity Date but prior to the time the entire interest in the
Contract has been distributed, the remaining interest must be distributed
at least as rapidly as under the method of distribution being used as of
the date of the death of the Owner; and (b) if the Owner dies prior to the
Annuity Date, the death proceeds must be distributed within five years
after the date of the death of the Owner. These rules do not apply,
however, where the surviving spouse of the Owner is the designated
beneficiary under the Contract, and thus is treated under section 72(s) of
the Code as a successor Owner of the Contract. The Non-Qualified Contracts
are intended to comply with the requirements of section 72(s), and will be
modified if necessary to ensure compliance with any future interpretations
of section 72(s).

QUALIFIED CONTRACTS

The Qualified Contract is designed for use with several types of
retirement plans. Special favorable tax treatment is available for
Qualified Contracts, although the tax rules applicable to such Contracts
vary according to the type of plan and the terms and conditions of the
plan. Adverse tax consequences may result from: (i) contributions to
Qualified Contracts in excess of specified limits; (ii) distributions from
Qualified Contracts prior to age 59 1/2 (subject to certain exceptions);
(iii) failure to make distributions from Qualified Contracts that conform
to specified minimum distribution rules; (iv) the receipt of aggregate
distributions from Qualified Contracts in excess of a specified annual
amount; and (v) other circumstances.

<REDLINE>
Aetna makes no attempt to provide more than general information about
plans which qualify for special federal income tax treatment under the
Code. Owners and participants under retirement plans, as well as Annuitants
and Beneficiaries, are cautioned that the rights of any person to any
benefits under Qualified Contracts may be subject to the terms and
conditions of the retirement plans themselves, regardless of the terms and
conditions of the Qualified Contract issued in connection with such plans.
Purchasers of Qualified Contracts for use with any retirement plan should

consult their legal counsel and tax advisor regarding the suitability of a
Qualified Contract for their retirement plan.
</REDLINE>

(a) Section 403(b) Plans. Under section 403(b) of the Code,
payments made by public school systems and certain tax-exempt
organizations to purchase annuity contracts for their employees are
excludable from the gross income of the employee, subject to certain
limitations. However, these payments may be subject to FICA (Social
Security) taxes.

(b) Individual Retirement Annuities. Sections 219 and 408 of
the Code permit individuals or their employers to contribute to an
individual retirement program known as an Individual Retirement
Annuity or "IRA". Individual Retirement Annuities are subject to
complex limitations on the amounts which may be contributed and
deducted and on the times when distributions may commence. In
addition, distributions from certain other types of retirement plans
may be rolled over into an Individual Retirement Annuity on a tax-
deferred basis.

(c) Corporate Pension and Profit-Sharing Plans and H.R 10
Plans. Sections 401(a) and 403(a) of the Code permit employers to
establish various types of retirement plans for employees, and permit
self-employed individuals to establish retirement plans for
themselves and their employees which qualify for special federal
income tax treatment. These retirement plans may permit the purchase
of the Qualified Contracts to provide benefits under the plans.

OTHER TAX CONSIDERATIONS

Penalty Tax on Certain Distributions

In the case of any taxable distribution from a Non-Qualified
Contract, there may be a penalty tax equal to 10% of the taxable amount of
the distribution. In general, however, this penalty tax does not apply to
distributions: (1) made on or after the date on which the Owner attains
age 59 1/2; (2) made as a result of death or disability of the Owner; or
(3) received in substantially equal periodic payments as a life annuity.
Other tax penalties may apply to certain distributions under a Qualified
Contract.

Transfers of Ownership or Benefits

A transfer of ownership of a Contract, or the designation of an
Annuitant or other Beneficiary who is not also the Owner may result in tax
consequences to the Owner, Annuitant, or Beneficiary that are not discussed
herein. Owners contemplating such a transfer or assignment should contact

their tax advisors with respect to the potential tax effects of such
transactions.

Multiple Contracts

<REDLINE>
Non-Qualified Contracts that are issued by Aetna (or one of our
affiliates) to the same Owner during any calendar year may be treated as
one annuity contract for purposes of determining the amount includible in
gross income. Any person considering the purchase of more than one annuity
contract should consult their tax advisor.
</REDLINE>
Section 1035

<REDLINE>
Section 1035 of the Code provides that no gain or loss shall be
recognized on the exchange of an annuity contract for another. Special
rules and procedures apply to exchanges subject to section 1035. You
should consult your tax advisor as to how to proceed if you intend to take
advantage of the tax benefits provided for exchanges under section 1035.
</REDLINE>

Investor Control

It is possible that regulations or other administrative guidance will
be issued concerning the extent to which owners may direct their
investments to particular divisions of a separate account without being
treated for tax purposes as the owners of the assets in such divisions.
Aetna reserves the right to modify the Contracts, as necessary, to prevent
the Owner from being treated as owning the assets in the Subaccounts.

Income Tax Withholding

Distributions are generally subject to withholding for the federal
income tax liability of the recipient at rates which vary according to the
type of distribution and the tax status of the recipient. However, for
distributions which are not "eligible rollover distributions" under
Qualified Contracts, the recipient may elect not to have withholding apply.
"Eligible rollover distributions" under Qualified Contracts are subject to
withholding unless they are transferred directly to an eligible individual
retirement account, qualified retirement plan, or section 403(b) plan.

DISTRIBUTION OF THE CONTRACT

<REDLINE>
Aetna Life Insurance and Annuity Company is the principal underwriter
of the Contracts. Third party broker-dealers may also serve as
distributors. Aetna is registered as broker-dealer with the SEC and
is a member of the National Association of

Securities Dealers, Inc. Although Aetna does not intend to offer or sell
any new Contracts, additional Purchase Payments will continue to be
accepted under existing in-force Contracts. Aetna may enter into contracts
with various broker/dealers to assist in accepting additional Purchase
Payments. The compensation paid by Aetna for this service is not
anticipated to be greater than 6.5% of Purchase Payments made.
</REDLIN>

MISCELLANEOUS

VOTING RIGHTS

As previously stated, all of the assets of the Separate Account are
shares of a corresponding portfolio of the Oppenheimer Variable Account
Funds held in the Subaccounts of the Separate Account. Based on our view
of present applicable law, we will vote the Fund shares held in the
Separate Account at meetings of shareholders in accordance with instruc-
tions received from Owners having an interest in the Subaccount. However,
if the 1940 Act or any related regulations should be amended, or if present
interpretations change, and we determine that we are permitted to vote the
Fund shares in our own right, we may elect to do so.

You hold a voting interest in each Fund in which you have value in
the corresponding Subaccount. The number of Fund shares which are
attributable to you is determined by dividing your value in a particular
Subaccount by the net asset value of one Fund share. The number of votes
which you have a right to cast will be determined as of the record date
established by each Fund.

We will solicit voting instructions by mail prior to the shareholder
meetings. Each person having a voting interest in a Subaccount will be
sent proxy material, reports and other materials relating to the
appropriate Funds. If we do not receive your instructions prior to the
meeting, your shares as well as any shares not attributable to Owners will
be voted in the same proportion as the instructions received from all
Owners providing timely instructions.

CHANGES IN THE CONTRACT

Generally, we may not change or amend the Contract without the consent of
the Owner, except as expressly provided in the Contract. However, we may
change or amend the Contract to ensure that the Contract complies with any
state law, federal law or the Code.

INCONTESTABILITY

The Contract is incontestable.

NONPARTICIPATING

The Contract is nonparticipating. No dividends are payable and the
Contract will not share in the profits or surplus earnings of Aetna.

ASSIGNMENT

During the lifetime of the Annuitant, the Owner of any Non-Qualified
Contract may assign the Contract. An assignment is a transfer of all or
some of the Contract rights and privileges to another person. A change of
Owner is an absolute assignment.

Generally, a Qualified Contract may not be sold, assigned, transferred,
discounted or pledged as collateral for a loan or as security for the
performance of an obligation unless permitted by your qualified retirement
plan or by laws relevant to your Qualified Contract.

<REDLINE>
No assignment of a Contract will be binding on us unless made in writing
and sent to us at our Home Office. The Company will use reasonable
procedures to confirm that the assignment is authentic, including
verification of signature. If the Company fails to follow its procedures,
it would be liable for any losses to you directly resulting from the
failure. Otherwise, we are not responsible for the validity of any
assignment. The rights of the Owner and the interest of the Annuitant and
any Beneficiary will be subject to the rights of any assignee of record.
</REDLINE>

ANNUAL CONTRACT REPORT

Prior to the Annuity Date we will mail you quarterly reports showing:

(1) the Value of any amounts held in,
(a) the Fixed Account; and
(b) the Subaccounts under the Separate Account;

(2) the number of any Subaccount Units; and

(3) the Subaccounts Unit Value.

MISSTATEMENT OF AGE OR SEX

If the age or sex of the Annuitant has been misstated, the benefits payable
under the Contract will be adjusted to those that the Accumulation Value
would have purchased based on the correct age and sex. Any overpayments or
underpayments we make as a result of such misstatement will be respectively
charged against or credited to the Income Payments to be made so as to
adjust for any overpayment or underpayment. Sex is not a factor when
annuity payments are based on unisex annuity payment rate tables.

TELEPHONE TRANSFERS

<REDLINE>
You automatically have the right to make transfers among the Subaccounts
and the Fixed Account by telephone. Aetna has enacted reasonable
procedures to prevent abuses of transactions by telephone. The procedures
include requiring the use of a personal identification number (PIN) in
order to execute transactions and to ensure authenticity, the Company
records all calls on the 800 line. You are responsible for safeguarding
your PIN, and for keeping your Accumulation Account information
confidential. If Aetna fails to follow these procedures it would be liable
for any losses to you resulting from the failure.
</REDLINE>

LEGAL PROCEEDINGS

We and our Board of Directors know of no material legal proceedings pending
to which the Separate Account is a party or which would materially affect
the Separate Account.

LEGAL MATTERS

The validity of the securities offered by this Prospectus has been passed
upon by Susan E. Bryant, Esq., Counsel to the Company.

TABLE OF CONTENTS
OF THE
STATEMENT OF ADDITIONAL INFORMATION

A Statement of Additional Information is available which contains
more details concerning the subjects discussed in this Prospectus. The
following is the Table of Contents for that statement.

Page
<REDLINE>
General Information and History . . . . . . . . . . . . . . . . . . . . . 2
Variable Annuity Account G . . . . . . . . . . . . . . . . . . . . . . . 2
Offering and Purchase of Contracts . . . . . . . . . . . . . . . . . . . 2
Dollar-Cost Averaging . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Financial Statements of CLIAC Separate Account A . . . . . . . . . . . S-1
Financial Statements of Aetna Life Insurance and Annuity Company . . . F-1
</REDLINE>

APPENDIX A

THE FIXED ACCOUNT

Net Purchase Payments and Transfers allocated to the Fixed Account
become part of our General Account. As a result of exemptive and
exclusionary provisions of the Federal securities laws, interests in the
Fixed Account have not been registered under the Securities Act of 1933
("1933 Act") nor is the Fixed Account an Investment Company under the 1940
Act. Accordingly, neither the Fixed Account nor any interest in the Fixed
Account will generally be subject to either the 1933 Act or the 1940 Act.
Disclosure regarding the General Account and the Fixed Account Option,
however, may be subject to generally applicable provisions of the federal
securities laws regarding the accuracy and completeness of the statements.
The SEC has not reviewed the disclosures in this Prospectus which relate to
the Fixed Account.

The Fixed Account option guarantees an interest rate for one year
from the date amounts are allocated or transferred to the Fixed Account.
At the end of each year, the current rate will be guaranteed for the next
one year period. The guaranteed rate will never be less than 4.5%
annually.

The guaranteed one year rate will be based upon Aetna's investment
income earned on invested assets and the amortization of any capital gains
and/or losses realized on the sale of invested assets. We assume the risk
of investment gains or losses by guaranteeing the one year rate, while you
bear the risk that the guaranteed one year rate may not exceed 4.5%.

Some states require that any balance you maintain in the Fixed
Account be at least $2,000.

TRANSFERS, WITHDRAWALS or SURRENDERS

You may make Withdrawals or Surrenders from the Fixed Account subject
to Surrender Charges or any required tax withholding or penalty. See
CHARGES AND DEDUCTIONS--SURRENDER CHARGES; FEDERAL TAX MATTERS. You may
also make transfers into or out of the Fixed Account.

The minimum amount which you may Withdraw or Transfer from the Fixed
Account is the lesser of $500 or your value in the Fixed Account. The
maximum amount which you may Withdraw, Transfer or apply to the Partial An-
nuity Benefit each calendar year is limited to 25% of your value of the
Fixed Account. If any request for a Withdrawal, Transfer, or exercise of
the Partial Annuity Benefit would reduce your value in the Fixed Account to
less than $2,000, you have the right to increase your request to include
the balance. We may defer payment of any Withdrawal or Surrender from the
Fixed Account for up to six months from the date we receive your written
request.

<PAGE> Appendix-1
<PAGE>

There is no limit on the number of Transfers into the Fixed Account.
However, the sum of the amounts which can be allocated to and transferred
into the Fixed Account over the life of the Contract is limited to
$250,000. We reserve the right to change this limit.

<PAGE> Appendix-2
<PAGE>

VARIABLE ANNUITY ACCOUNT G
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY

<REDLINE>
Statement of Additional Information dated October 2, 1995

This Statement of Additional Information is not a prospectus and should be
read in conjunction with the current prospectus for Variable Annuity
Account G (the "Separate Account") dated October 2, 1995.
</REDLINE>

A free prospectus is available upon request from the local Aetna Life
Insurance and Annuity Company office or by writing to or calling:

Aetna Life Insurance and Annuity Company
Strategic Markets and Products
151 Farmington Avenue
Hartford, Connecticut 06156
1-800-531-4547

Read the prospectus before you invest. Terms used in this Statement of
Additional Information shall have the same meaning as in the prospectus.

TABLE OF CONTENTS

Page
<REDLINE>
General Information and History . . . . . . . . . . . . . . . . . . . . . 2
Variable Annuity Account G . . . . . . . . . . . . . . . . . . . . . . . 2
Offering and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Dollar-Cost Averaging . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Financial Statements of CLIAC Separate Account A . . . . . . . . . . . S-1
Financial Statements of Aetna Life Insurance and Annuity Company . . . F-1
</REDLINE>

GENERAL INFORMATION AND HISTORY

Aetna Life Insurance and Annuity Company (the "Company") is a stock life
insurance company which was organized in 1976 under the insurance laws of
the State of Connecticut. The Company is a wholly owned subsidiary of
Aetna Life and Casualty Company which, with its subsidiaries, constitutes
one of the nation's largest diversified financial services organizations.
The Company's Home Office is located at 151 Farmington Avenue, Hartford,
Connecticut 06156.

In addition to serving as the principal underwriter and the depositor for
the Separate Account, the Company is also a registered investment adviser
under the Investment Advisers Act of 1940, and a registered broker-dealer
under the Securities Exchange Act of 1934.

Other than the mortality and expense risk charges and administrative
expense charge described in the prospectus, all expenses incurred in the
operations of the Separate Account are borne by the Company. See "Charges
and Deductions" in the prospectus.

The assets of the Separate Account are held by the Company. The Separate
Account has no custodian. However, the Funds in whose shares the assets of
the Separate Account are invested each have custodians, as discussed in
their respective prospectuses.

VARIABLE ANNUITY ACCOUNT G

<REDLINE>
Variable Annuity Account G (the "Separate Account") is a separate account
originally established by Confederation Life Insurance and Annuity Company
as CLIAC Separate Account A under the laws of the State of Georgia and was
re-established by the Company pursuant to the laws of the State of
Connecticut in connection with the in-tact transfer of CLIAC Separate
Account A. The Separate Account funds the Contract. The Separate Account
is registered with the Securities and Exchange Commission as a unit
investment trust under the Investment Company Act of 1940, as amended. The
assets of the Separate Account will be invested exclusively in shares of
the mutual funds described in the Prospectus. Purchase Payments made under
the Contract may be allocated to one or more of the variable investment
options listed below. The Company may make additions to or deletions from
available investment options as permitted by law. The availability of the
Funds is subject to applicable regulatory authorization.
</REDLINE>

Oppenheimer Money Fund
Oppenheimer High Income Fund
Oppenheimer Bond Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Global Securities Fund
Oppenheimer Strategic Bond Fund

Complete descriptions of each of the Funds, including their investment
objectives, polices, risks and fees and expenses, is contained in the
prospectuses and statements of additional information for each of the
Funds.

OFFERING AND PURCHASE

The Company is both the Depositor and the principal underwriter for the
securities sold by the prospectus. Although the Company no longer offers
the individual deferred variable annuity contracts, existing holders of in-
force contracts may make additional deposits.

DOLLAR-COST AVERAGING

The term "dollar-cost averaging" describes a system of investing a uniform
sum of money at regular intervals over an extended period of time. It is
based on the economic fact that buying a variably priced item with a
constant sum of money at fixed intervals results in acquiring more of the
item when prices are low and less of it when prices are high. In order to
maximize the effectiveness of dollar-cost averaging, it is important that
investors consider their financial ability to continue purchasing the
securities through periods of high and low price levels. Investors should
also note that no system can protect against reduced values in a declining
market.

INDEPENDENT AUDITORS

KMPG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are
the independent auditors for the Company. KPMG Peat Marwick LLP performs
annual audits of the Company and it is intended that KPMG Peat Marwick LLP
will become the auditor of Variable Annuity Account G.

Coopers & Lybrand L.L.P. are the independent auditors of the predecessor of
Variable Annuity Account G, CLIAC Separate Account A, for the year ended
December 31, 1994.

CLIAC Separate Account A
Table of Contents
year ended December 31, 1994

Report of Independent Auditors S-2

Audited Financial Statements

Statement of Assets and Liabilities S-3

Statement of Operations S-6

Statement of Changes in Net Assets S-8

Notes to Financial Statements S-11

[Coopers & Lybrand L.L.P. letterhead]

Report of Independent Auditors

Board of Directors
Confederation Life Insurance and Annuity Company

We have audited the accompanying statement of assets and liabilities of
CLIAC Separate Account A as of December 31, 1994, and the related
statements of operations and changes in net assets for the year then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The statement of changes in net assets of
CLIAC Separate Account A for the year ended December 31, 1993 was audited
by other auditors whose report dated January 17, 1994, expressed an
unqualified opinion on that statement.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CLIAC Separate Account
A at December 31, 1994, the results of its operations and the changes in
net assets for the year then ended in conformity with generally accepted
accounting principles.

As discussed in Note 1 to the financial statements, the Company's ultimate
parent was put into rehabilitation on August 12, 1994. Additionally, as
discussed in Note 8 to the financial statements the Company entered into a
Proposed Assumption Reinsurance Agreement.

Coopers & Lybrand L.L.P.

Atlanta, Georgia
May 3, 1995

CLIAC Separate Account A
Statement of Assets and Liabilities
December 31, 1994
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percent Money
of Net Fund
ASSETS Assets Combined Subaccount

Investments at net asset value:
Oppenheimer Money Fund
30,621,581 shares at $1/share
(cost $30,621,581) 10.93% $ 30,621,58 $30,621,581
Oppenheimer Bond Fund
1,682,683 shares at $10.78/share
(cost $19,483,793) 6.48 18,139,319 0
Oppenheimer Capital Appreciation Fund
1,855,052 shares at $25.95/share
(cost $50,657,480) 17.18 48,138,532 0
Oppenheimer Global Securities Fund
3,595,598 shares at $15.09/share
(cost $59,017,290) 19.37 54,257,633 0
Oppenheimer Growth Fund
1,760,874 shares at $17.68/share
(cost $30,742,913) 11.11 31,132,209 0
Oppenheimer High Income Fund
3,303,418 shares at $9.79/share
(cost $35,590,316) 11.55 32,340,464 0
Oppenheimer Multiple
Strategies Fund
3,888,742 shares at $12.91/share
(cost $52,841,547) 17.92 50,203,648 0
Oppenheimer Strategic Bond Fund
3,319,959 shares at $4.60/share
(cost $16,427,870) 5.45 15,271,814 0
______ ____________ ___________
Total Investments
(cost $295,382,790) 99.98 280,105,200 30,621,581
Cash 0.00 0 0
Dividends receivable 0.02 60,774 60,774
Contractholders' funds
receivable from Oppenheimer 0.07 203,528 170,552
______ ____________ __________
Total Assets 100.07 280,369,502 30,852,877

LIABILITIES

Distributions payable to
Sponsor (Note 7) 0.07 203,528 170,522
______ ____________ __________
Total liabilities 0.07 203,528 170,552
______ ____________ ___________
Net assets (Note 4) 100.00% $280,165,974 $30,682,355

====== ============ ===========
Total units 2,665,713
Unit Value $11.51
___________
Net assets held for
the benefit of contractholders $30,682,355
===========
</TABLE>

The accompanying notes are an integral part of these financial statements

<TABLE>

<C> <C> <C> <C> <C>
Capital Global High
Appreciation Securities Growth Income
Bond Fund Fund Fund Fund Fund
Subaccount Subaccount Subaccount Subaccount Subaccount

$ 0 $ 0 $ 0 $ 0 $ 0

18,139,319 0 0 0 0

0 48,138,532 0 0 0

0 0 54,257,633 0 0

0 0 0 31,132,209 0

0 0 0 0 32,340,464

0 0 0 0 0

0 0 0 0 0
___________ ____________ ____________ ___________ ___________

18,139,319 48,138,532 54,257,633 31,132,209 32,340,464
0 0 0 0 0
0 0 0 0 0

672 0 31,740 0 0
___________ ____________ ____________ ___________ ___________
18,139,991 48,138,532 54,289,373 31,132,209 32,340,464

672 0 32,334 0 0
___________ ____________ ____________ ___________ ___________
672 0 32,334 0 0
___________ ____________ ____________ ___________ ___________
$18,139,319 $48,138,532 $54,257,039 $31,132,209 $32,340,464
============ ============ ============ =========== ===========
1,445,364 2,402,122 3,590,803 2,083,816 1,978,010
$12.55 $20.04 $15.11 $14.94 $16.35
___________ ____________ ____________ ___________ ___________

$18,139,319 $48,138,532 $54,257,039 $31,132,209 $32,340,464
============ ============ ============ =========== ===========
</TABLE>

<TABLE>

<C> <C>
Multiple
Strategies Strategic
Fund Bond Fund
Subaccount Subaccount

$ 0 $ 0

0 0

50,203,648 0

0 15,271,814

___________ ___________

50,203,648 15,271,814
0 0
0 0

0 594
__________ ___________
50,203,648 15,272,408

0 0
__________ ___________
0 0
___________ ___________
$50,203,648 $15,272,408
============ ===========
3,598,828 1,556,820
$13.95 $ 9.81
___________ ___________

$50,203,648 $15,272,408
============ ===========
</TABLE>

CLIAC Separate Account A
Statement of Operations
year ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money
Fund Bond Fund
Combined Subaccount Subaccount

Net investment income:
Dividends $ 15,528,111 $ 1,333,737 $ 1,121,342
Mortality, expense
and administrative
charges to Sponsor
(Note 2) 3,811,001 431,654 257,294
_____________ ____________ ____________

Net investment income
(loss) 11,717,110 902,083 864,048

Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on
investments 7,600,329 0 (62,693)
Net unrealized
depreciation on
investments (31,643,373) 0 (1,400,706)
_____________ ____________ ____________

Net realized and
unrealized loss on
investments (24,043,044) 0 (1,463,399)
_____________ ____________ ____________

Net increase (decrease)
in net assets
resulting from
operations $(12,325,934) $ 902,083 $ (599,351)

============= ============ ============

</TABLE>
The accompanying notes are an integral part of these financial statements.

<TABLE>
<S> <C> <C> <C> <C> <C>
Capital Global High Multiple
Appreciation Securities Growth Income Strategies Strategic
Fund Fund Fund Fund Fund Bond Fund
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount

$4,863,538 $ 877,735 $ 306,336 $ 3,172,297 $ 2,774,164 $ 1,078,962

579,316 739,144 403,165 498,235 702,457 199,736
__________ ___________ ___________ ___________ __________ ___________

4,284,222 138,591 (96,829) 2,674,062 2,071,707 879,226

(1,039,088) 8,020,371 598,027 (487,728) 1,016,180 (444,740)

(6,989,991) (12,784,269) (661,312) (3,875,999) (4,741,933) (1,189,163)
__________ ___________ ___________ ___________ __________ ___________

(8,029,079) (4,763,898) (63,285) (4,363,727) (3,725,753) (1,633,903)
__________ ___________ ___________ ___________ __________ ___________

(3,744,857) (4,625,307) (160,114) (1,689,665) (1,654,046) (754,677)
=========== =========== =========== ============ =========== ===========
</TABLE>

CLIAC Separate Account A
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money
Fund Bond Fund
Combined Subaccount Subaccount

Net assets at January 1, 1993 $ 61,074,838 $ 9,058,128 $ 7,105,407
Changes from operations:
Net investment income (loss) 4,127,337 221,142 722,407
Net realized gain (loss) on
investments 6,333,899 0 292,323
Net unrealized appreciation
(depreciation) on investments 14,106,236 0 140,883
_________ _________ _________

Net increase (decrease) in net assets
resulting from operations 24,567,472 221,142 1,155,613

Net increase from unit transactions
(Note 5) 132,878,471 5,320,001 10,086,947
___________ _________ __________

Total increase in net assets 157,445,943 5,541,143 11,242,560
___________ __________ __________

Net assets at December 31, 1993 218,520,781 14,599,271 18,347,967
Changes from operations:
Net investment income (loss) 11,717,110 902,083 864,048
Net realized gain (loss) on
investment 7,600,329 0 (62,693)
Net unrealized appreciation
(depreciation) on investments (31,643,373) 0 (1,400,706)
__________ __________ _________

Net increase (decrease) in net assets
resulting from operations (12,325,934) 902,083 (599,351)

Net increase from unit transactions
(Note 5) 73,971,127 15,181,001 390,703
__________ __________ _________

Total increase assets 61,645,193 16,083,084 (208,648)
__________ __________ _________

Net assets at December 31, 1994 280,165,974 30,682,355 18,139,319
=========== ========== ==========

</TABLE>
The accompanying notes are an integral part of these financial statements.

Capital Global
Appreciation Securities Growth
Fund Fund Fund
Subaccount Subaccount Subaccount

$ 12,573,119 $ 6,353,733 $ 7,982,724

322,325 (211,947) 90,877

2,766,036 967,550 709,744

2,567,329 8,465,074 321,334
__________ _________ _________

5,655,690 9,220,677 1,121,955

18,317,011 21,155,724 16,402,862
__________ __________ __________

23,972,701 30,376,401 17,524,817
__________ __________ __________

36,545,820 36,730,134 25,507,541

4,284,222 138,591 (96,829)

(1,039,088) 8,020,371 598,027

(6,989,991) (12,784,269) (661,312)
___________ __________ __________

(3,744,857) (4,625,307) (160,114)

15,337,569 22,152,212 5,784,782
__________ __________ _________

11,592,712 17,526,905 5,624,668
__________ __________ _________

$ 48,138,532 $ 54,257,039 $ 31,132,209
========== ========== ==========

High Multiple
Income Strategies Strategic
Fund Fund Bond Fund
Subaccount Subaccount Subaccount

$ 7,500,206 $10,501,521 $ 0

2,058,364 807,973 116,196

960,055 561,809 76,382

740,568 1,837,940 33,108
__________ _________ _________

3,758,987 3,207,722 225,686

23,147,646 28,792,581 9,655,699
__________ __________ __________

26,906,633 32,000,303 9,881,385
__________ __________ __________

34,406,839 42,501,824 9,881,385

2,674,062 2,071,707 879,226

(487,728) 1,016,180 (444,470)

(3,875,999) (4,741,933) (1,189,163)
___________ __________ __________

(1,689,665) (1,654,046) (754,677)

(376,710) 9,355,870 6,145,700
__________ __________ _________

(2,066,375) 7,701,824 5,391,023
__________ __________ _________

$ 32,340,464 $ 50,203,648 $ 15,272,408
========== ========== ==========

</TABLE>

CLIAC Separate Account A
Notes to Financial Statements

1. Organization and Significant Accounting Policies:

CLIAC Separate Account A (the "Separate Account") is a separate account
of Confederation Life Insurance and Annuity Company (a stock life
insurance company) (the "Sponsor"), a wholly owned subsidiary of
Confederation Financial Holdings, Inc. ("CFH"). CFH is a wholly owned
subsidiary of Confederation Life Insurance Company (U.S.) in
Rehabilitation ("CLIC U.S."), an estate formed from the U.S. division of
Confederation Life Insurance Company of Canada ("CLIC Canada") which is
a mutual company incorporated under the laws of Canada. The Separate
Account was established for the purpose of funding variable annuity
contracts issued by the Sponsor. The Separate Account became registered
as a unit investment trust under the Investment Company Act of 1940, as
amended, during 1990, and recorded its first policy sale on August 23,
1990.

Currently, the Separate Account has eight Subaccounts, each of which
invests exclusively in shares of the corresponding Portfolios of the
Oppenheimer Variable Account Funds (the "Oppenheimer Funds"): the
Oppenheimer Money Fund, the Oppenheimer Bond Fund, the Oppenheimer
Capital Appreciation Fund, the Oppenheimer Global Securities Fund, the
Oppenheimer Growth Fund, the Oppenheimer High Income Fund, the
Oppenheimer Multiple Strategies Fund and the Oppenheimer Strategic Bond
Fund. The contractholder may allocate all or part of the initial
premium and additional premiums, if any, to one or more Subaccounts of
the Separate Account or to the Sponsor's General Account. The Sponsor's
General Account consists of all assets owned by the Sponsor other than
those in the Separate Account.

CLIC Canada was placed in liquidation on August 11, 1994 by the Office
of the Superintendent of Financial Institutions, the federal regulator
of insurance companies in Canada. CLIC U.S. was placed under
rehabilitation pursuant to the laws of the State of Michigan on August
12, 1994 by the Circuit Court for the County of Ingham, State of
Michigan.

Basis of Presentation

The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles.

Investments

The investments in the Oppenheimer Funds are stated at the closing
market values per share on December 31, 1994. Investment transactions
are recorded on the trade date. The difference between the cost and
current market value of investments owned is recorded as an unrealized
gain or loss on investments. Realized gains and losses are calculated
on a "first-in, first-out" basis.

Notes to Financial Statements, Continued

1. Organization and Significant Accounting Policies, continued:

Dividends

Dividends are recorded on the ex-dividend date and reflect the daily
dividends declared by the Oppenheimer Funds from their accumulated net
investment income. Dividends paid to the Separate Account are
automatically reinvested in shares of the Oppenheimer Funds.

Federal Income Taxes

Operations of the Separate Account form a part of, and are taxed with,
operations of the Sponsor, which is taxed as a "life insurance company"
under the Internal Revenue Code. Under current law, no federal income
taxes are payable with respect to the Separate Account's net investment
income and the net realized gain on investments.

2. Mortality, Expense and Administrative (M, E and A) Charges to Sponsor:

Mortality and Expense Risk Charge

A daily charge, equal to, on an annual basis, 1.25% of the daily net
asset value is deducted from each Subaccount to compensate the Sponsor
for certain mortality and expense risks assumed. The mortality risk
arises from the Sponsor's obligation to make income payments regardless
of how long all annuitants may live. The expense risk assumed by the
Sponsor is the risk that actual administrative costs will exceed the
amount recovered through the administrative charges.

Administrative Expense Charge

A daily charge, equal to, on an annual basis, .10% of the daily net
asset value is deducted from each Subaccount to reimburse the Sponsor
for administrative expenses.

3. Surrender Charges and Annual Contract Fee:

Surrender Charges

There are no sales expenses deducted from premiums at the time premiums
are paid. If a contract has not been in force for six years, upon
surrender or for certain withdrawals, a surrender charge is deducted
from the proceeds. Surrender charges may be decreased or waived on
contracts meeting certain restrictions as determined by the Sponsor.

Annual Contract Fee

An annual contract fee of $30 is deducted on each contract anniversary
date, and on any day the contract is surrendered, if such surrender

occurs on any day other than the contract anniversary date. Annual
contract fees of $134,132 were assessed in 1994.

4. Net Assets:

Net assets at December 31, 1994, consisted of the following:

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulated Accumulated
Unit M, E and A Investment
Subaccount Transactions Charges Income

Money Fund $ 29,347,918 $ (703,163) $ 2,037,600
Bond Fund 17,404,876 (466,646) 2,298,184
Capital Appreciation
Fund 44,443,094 (945,747) 5,570,809
Global Securities Fund 50,128,710 (1,019,288) 901,377
Growth Fund 29,276,703 (673,609) 674,793
High Income Fund 29,720,700 (818,451) 6,127,821
Multiple Strategies Fund 48,082,444 (1,100,758) 4,207,414
Strategic Bond Fund 15,801,399 (238,627) 1,234,049
_____________ ______________ _____________
$ 264,205,844 $ (5,966,289) $ 23,052,047
============= ============== =============

</TABLE>
<TABLE>

<S> <C> <C> <C>
Unrealized Accumulated
Appreciation Realized
(Depreciation) Gain (Loss) Net Assets at
on on December 31,
Investments Investments 1994

$ 0 $ 0 $ 30,682,355
(1,344,474) 247,379 18,139,319

(2,519,084) 1,589,460 48,138,532
(4,814,207) 9,060,447 54,257,039
389,318 1,465,004 31,132,209
(3,249,851) 560,245 32,340,464
(2,637,855) 1,652,403 50,203,648
(1,156,055) (368,358) 15,272,408
______________ _____________ _____________

$ (15,332,208) $ 14,206,580 $ 280,165,974
============== ============= =============

</TABLE>

5. Summary of Changes From Unit Transactions:

The following table represents a summary of changes from unit
transactions for the year ended December 31, 1994:

<TABLE>
<CAPTION>
<S> <C> <C>
Units Amount
Money Fund Subaccount:
Contract purchases 1,231,953 $ 13,833,776
Net transfers in (out) 694,945 7,786,795
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (565,631) (6,439,570)
__________ ____________
1,361,267 15,181,001

Bond Fund Subaccount:
Contract purchases 392,024 5,010,896
Net transfers in (out) (191,031) (2,453,777)
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (170,684) (2,166,416)
__________ ____________
30,309 390,703

Capital Appreciation Fund Subaccount:
Contract purchases 786,343 16,467,380
Net transfers in (out) 155,730 2,983,796
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (205,287) (4,113,607)
__________ ____________
736,786 15,337,569

Global Securities Fund Subaccount:
Contract purchases 1,617,697 26,321,335
Net transfers in (out) 30,940 1,175,688
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (326,197) (5,344,811)
___________ _____________
1,322,440 22,152,212

Growth Fund Subaccount:
Contract purchases 544,155 8,081,139
Net transfers in (out) 57,059 1,001,872
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (220,059) (3,298,229)
__________ ____________
381,155 5,784,782

High Income Subaccount:
Contract purchases 675,940 11,560,250
Net transfers in (out) (493,851) (8,193,583)
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (222,576) (3,743,377)
__________ ____________
(40,487) (376,710)
</TABLE>

Notes to Financial Statements, Continued

5. Summary of Charges From Unit Transactions, continued:
<TABLE>
<CAPTION>
<S> <C> <C>
Units Amount
Multiple Strategies Subaccount:
Contract purchases 1,388,798 $ 19,810,754
Net transfers in (out) (206,727) (2,890,043)
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (532,934) (7,564,841)
__________ ____________
649,137 9,355,870

Strategic Bond Fund Subaccount:
Contract purchases 695,751 7,049,660
Net transfers in (out) 21,216 253,994
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (115,960) (1,157,954)
__________ ____________
601,007 6,145,700
____________

Net increase from unit transactions $ 73,971,127
=============
</TABLE>
The following table represents a summary of changes from unit transactions
for the year ended December 31, 1993:
<TABLE>
<CAPTION>
<S> <C> <C>
Units Amount
Money Fund Subaccount:
Contract purchases 1,100,775 $ 12,223,646
Net transfers in (out) (561,996) (6,261,025)
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (57,842) (642,620)
__________ ____________
480,937 5,320,001

Bond Fund Subaccount:
Contract purchases 988,370 12,419,740
Net transfers in (out) (124,998) (1,584,796)
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (59,965) (747,997)
__________ ____________
803,407 10,086,947

Capital Appreciation Fund Subaccount:
Contract purchases 1,021,818 19,552,988
Net transfers in (out) (19,588) (67,689)
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (58,270) (1,168,288)
__________ ____________
943,960 18,317,011
</TABLE>

Notes to Financial Statements, Continued

5. Summary of Changes From Unit Transactions, continued:

<TABLE>
<S> <C> <C>
Units Amounts
Global Securities Fund Subaccount:
Contract purchases 1,229,561 16,183,219
Net transfers in (out) 408,146 5,373,633
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (33,924) (401,128)
___________ _____________
1,603,783 21,155,724

Growth Fund Subaccount:
Contract purchases 1,126,327 16,224,111
Net transfers in (out) 65,292 960,900
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (53,957) (782,149)
__________ ____________
1,137,662 16,402,862

High Income Subaccount:
Contract purchases 1,457,986 23,060,435
Net transfers in (out) 74,449 1,170,150
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (68,306) (1,082,939)
__________ ____________
1,464,129 23,147,646

Multiple Strategies Subaccount:
Contract purchases 2,198,681 $ 29,964,331
Net transfers in (out) 20,709 260,067
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (104,772) (1,431,817)
__________ ____________
2,114,618 28,792,581

Strategic Bond Fund Subaccount:
Contract purchases 930,792 9,422,004
Net transfers in (out) 28,957 268,277
Terminated contracts, partial withdrawals,
transfers to annuity reserves, surrender
charges and annual contract fees (3,403) (34,582)
__________ ____________
956,346 9,655,699
____________

Net increase from unit transactions $132,878,471
=============
</TABLE>

Notes to Financial Statements, Continued

6. Purchases and Sales of Investments:

The aggregate cost of investments purchased and the aggregate proceeds
from investments sold were as follows for 1994:
<TABLE>
<CAPTION>
<S> <C> <C>
Aggregate Aggregate
Cost of Proceeds
Purchases from Sales

Money Fund Subaccount $ 134,751,246 $ 119,528,036
Bond Fund Subaccount 9,643,327 9,273,487
Capital Appreciation
Fund Subaccount 47,591,609 32,034,582
Global Securities
Fund Subaccount 54,632,597 32,284,386
Growth Fund Subaccount 22,368,264 16,514,186
High Income Fund
Subaccount 29,264,377 29,604,995
Multiple Strategies
Fund Subaccount 26,066,926 16,642,803
Strategic Bond Fund
Subaccount 16,600,662 10,351,856
_____________ _____________

$ 340,919,008 $ 266,234,331
============= =============

</TABLE>

7. Related Party Transactions:

As of December 31, 1994, Separate Account A has recorded Distributions
Payable to Sponsor in the accompanying statement of assets and
liabilities for funds requested from Oppenheimer for redemptions which
have not been transferred to the Sponsor for distribution.

8. Subsequent Event:

On May 3, 1995, the Sponsor entered into an Assumption Reinsurance
Agreement with Aetna Life Insurance and Annuity Company ("ALIAC") under
which ALIAC would assume liability through reinsurance for all of the
Sponsor's separate account policies as well as those individual life and
GIC policyholders who elect to be reinsured (subject to the approval of
the various states) and subject to the fulfillment of certain other
closing conditions. This assumption reinsurance transaction is
currently scheduled to close in the fourth quarter of 1995.

CONSOLIDATED FINANCIAL STATEMENTS
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES

INDEX

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended December 31, 1994,
1993 and 1992.......................................................... F-3
Consolidated Balance Sheets as of December 31, 1994 and 1993............ F-4
Consolidated Statements of Shareholder's Equity for the Years Ended
December 31, 1994, 1993 and 1992....................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1994, 1993 and 1992.................................................... F-6
Notes to Consolidated Financial Statements................................ F-8
</TABLE>

INDEPENDENT AUDITOR'S REPORT

The Shareholder and Board of Directors
Aetna Life Insurance and Annuity Company:

We have audited the accompanying consolidated balance sheets of Aetna Life
Insurance and Annuity Company and Subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of income, changes in
shareholder's equity and cash flows for each of the years in the three-year
period ended December 31, 1994. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Aetna
Life Insurance and Annuity Company and Subsidiaries at December 31, 1994
and 1993, and the results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 1994, in
conformity with generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, in 1993
the Company changed its methods of accounting for certain investments in
debt and equity securities and reinsurance contracts. In 1992, the Company
changed its method of accounting for income taxes and postretirement
benefits other than pensions.

KPMG Peat Marwick LLP

Hartford, Connecticut
February 7, 1995

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

CONSOLIDATED STATEMENTS OF INCOME
(MILLIONS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Premiums......................................... $ 124.2 $ 82.1 $ 72.5
Charges assessed against policyholders........... 279.0 251.5 235.4
Net investment income............................ 917.2 911.9 848.1
Net realized capital gains....................... 1.5 9.5 13.4
Other income..................................... 10.3 9.5 6.7
-------- -------- --------
Total revenue.................................. 1,332.2 1,264.5 1,176.1
-------- -------- --------
Benefits and expenses:
Current and future benefits...................... 852.4 806.4 761.6
Operating expenses............................... 227.2 201.3 213.5
Amortization of deferred policy acquisition
costs........................................... 36.1 37.7 32.9
-------- -------- --------
Total benefits and expenses.................... 1,115.7 1,045.4 1,008.0
-------- -------- --------
Income before federal income taxes and cumulative
effect adjustments................................ 216.5 219.1 168.1
Federal income taxes............................. 71.2 76.2 54.9
-------- -------- --------
Income before cumulative effect adjustments........ 145.3 142.9 113.2
Cumulative effect adjustments, net of tax:
Change in accounting for income taxes............ -- -- 22.8
Change in accounting for postretirement benefits
other than pensions............................. -- -- (13.2)
-------- -------- --------
Net income......................................... $ 145.3 $ 142.9 $ 122.8
======== ======== ========
</TABLE>

See Notes to Consolidated Financial Statements.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

CONSOLIDATED BALANCE SHEETS
(MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
ASSETS 1994 1993
------ --------- ---------
<S> <C> <C>
Investments:
Debt securities, available for sale:
(amortized cost: $10,577.8 and $9,783.9)...... $10,191.4 $10,531.0
Equity securities, available for sale:
Non-redeemable preferred stock
(cost: $43.3 and $38.3)....................... 47.2 45.9
Investment in affiliated mutual funds
(cost: $187.2 and $122.4)..................... 181.9 126.7
Short-term investments......................... 98.0 22.6
Mortgage loans................................. 9.9 10.1
Policy loans................................... 248.7 202.7
Limited partnership............................ 24.4 --
--------- ---------
Total investments.......................... 10,801.5 10,939.0
Cash and cash equivalents........................ 623.3 536.1
Accrued investment income........................ 142.2 124.7
Premiums due and other receivables............... 75.8 67.0
Deferred policy acquisition costs................ 1,172.0 1,061.0
Reinsurance loan to affiliate.................... 690.3 711.0
Other assets..................................... 15.9 12.6
Separate Accounts assets......................... 7,420.8 6,684.3
--------- ---------
Total assets............................... $20,941.8 $20,135.7
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
-------------------------------------

Liabilities:
Future policy benefits......................... $ 2,968.1 $ 2,741.8
Unpaid claims and claim expenses............... 23.8 27.2
Policyholders' funds left with the Company..... 8,901.6 9,003.9
--------- ---------
Total insurance liabilities................ 11,893.5 11,698.7
Other liabilities.............................. 302.1 229.7
Federal income taxes:
Current...................................... 3.4 40.6
Deferred..................................... 233.5 161.5
Separate Accounts liabilities.................. 7,420.8 6,684.3
--------- ---------
Total liabilities.......................... 19,853.3 18,889.0
--------- ---------

Shareholder's equity:
Common capital stock, par value $50
(100,000 shares authorized;
55,000 shares issued and outstanding)........ 2.8 2.8
Paid-in capital................................ 407.6 407.6
Net unrealized capital gains (losses).......... (189.0) 114.5
Retained earnings.............................. 867.1 721.8
--------- ---------
Total shareholder's equity................. 1,088.5 1,246.7
--------- ---------
Total liabilities and shareholder's equity. $20,941.8 $20,135.7
========= =========
</TABLE>

See Notes to Consolidated Financial Statements.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(MILLIONS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1994 1993 1992
-------- -------- ------
<S> <C> <C> <C>
Shareholder's equity, beginning of year.............. $1,246.7 $ 990.1 $867.4
Net change in unrealized capital gains (losses)...... (303.5) 113.7 (0.1)
Net income........................................... 145.3 142.9 122.8
-------- -------- ------
Shareholder's equity, end of year.................... $1,088.5 $1,246.7 $990.1
======== ======== ======
</TABLE>

See Notes to Consolidated Financial Statements.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income.................................. $ 145.3 $ 142.9 $ 122.8
Cumulative effect adjustments............... -- -- (9.6)
Increase in accrued investment income....... (17.5) (11.1) (8.7)
(Increase) decrease in premiums due and
other receivables.......................... 1.3 (5.6) (19.9)
Increase in policy loans.................... (46.0) (36.4) (32.4)
Increase in deferred policy acquisition
costs...................................... (96.5) (60.5) (60.8)
Decrease in reinsurance loan to affiliate... 27.8 31.8 37.8
Net increase in universal life account
balances................................... 164.7 126.4 130.8
Increase in other insurance reserve
liabilities................................ 65.7 86.1 20.5
Net increase in other liabilities and other
assets..................................... 53.9 7.0 20.2
Decrease in federal income taxes............ (11.7) (3.7) (11.8)
Net accretion of discount on bonds.......... (77.9) (88.1) (75.2)
Net realized capital gains.................. (1.5) (9.5) (13.4)
Other, net.................................. (1.0) 0.2 (0.2)
--------- --------- ---------
Net cash provided by operating activities. 206.6 179.5 100.1
--------- --------- ---------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale........ 3,593.8 473.9 543.3
Equity securities......................... 93.1 89.6 50.6
Investment maturities and collections of:
Debt securities available for sale........ 1,289.2 2,133.3 1,179.2
Short-term investments.................... 30.4 19.7 5.0
Cost of investment purchases in:
Debt securities........................... (5,621.4) (3,669.2) (2,612.2)
Equity securities......................... (162.5) (157.5) (63.0)
Short-term investments.................... (106.1) (41.3) (5.0)
Limited partnership....................... (25.0) -- --
--------- --------- ---------
Net cash used for investing activities.. (908.5) (1,151.5) (902.1)
--------- --------- ---------

Cash Flows from Financing Activities:
Deposits and interest credited for
investment contracts....................... 1,737.8 2,117.8 1,619.6
Withdrawals of investment contracts......... (948.7) (1,000.3) (767.7)
--------- --------- ---------
Net cash provided by financing
activities............................. 789.1 1,117.5 851.9
--------- --------- ---------
Net increase in cash and cash equivalents..... 87.2 145.5 49.9
Cash and cash equivalents, beginning of year.. 536.1 390.6 340.7
--------- --------- ---------
Cash and cash equivalents, end of year........ $ 623.3 $ 536.1 $ 390.6
========= ========= =========
Supplemental cash flow information:
Income taxes paid, net...................... $ 82.6 $ 79.9 $ 54.0
========= ========= =========
</TABLE>

See Notes to Consolidated Financial Statements.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993, AND 1992

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include Aetna Life Insurance and
Annuity Company and its wholly owned subsidiaries, Aetna Insurance Company
of America, Systematized Benefits Administrators, Inc., Aetna Private
Capital, Inc. and Aetna Investment Services, Inc. (collectively, the
"Company"). Aetna Life Insurance and Annuity Company is a wholly owned
subsidiary of Aetna Life and Casualty Company ("Aetna").

The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. Intercompany transactions have
been eliminated. Certain reclassifications have been made to 1993 and 1992
financial information to conform to the 1994 presentation.

The Company offers a wide range of life insurance products and annuity
contracts with variable and fixed accumulation and payout options. The
Company also provides investment advisory and other services to affiliated
mutual funds.

Accounting Changes

Accounting for Certain Investments in Debt and Equity Securities

On December 31, 1993, the Company adopted Financial Accounting Standard
("FAS") No. 115, Accounting for Certain Investments in Debt and Equity
Securities, which requires the classification of debt securities into three
categories: "held to maturity", which are carried at amortized cost;
"available for sale", which are carried at fair value with changes in fair
value recognized as a component of shareholder's equity; and "trading",
which are carried at fair value with immediate recognition in income of
changes in fair value.

Initial adoption of this standard resulted in a net increase of $106.8
million, net of taxes of $57.5 million, to net unrealized gains in
shareholder's equity. These amounts exclude gains and losses allocable to
experience-rated (including universal life) contractholders. Adoption of
FAS No. 115 did not have a material effect on deferred policy acquisition
costs.

Accounting and Reporting for Reinsurance of Short-Duration and
Long-Duration Contracts

During 1993, the Company adopted FAS No. 113, Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts, retroactive to
January 1, 1993. Reinsurance recoverables (previously reported as a
reduction in insurance reserve liabilities) and reinsurance receivables and
ceded unearned premiums are included in premiums due and other receivables.
The adoption of FAS No. 113 did not have a material impact on the Company's
1993 Consolidated Financial Statements.

Accounting for Income Taxes

The Company adopted FAS No. 109, Accounting for Income Taxes, in 1992,
retroactive to January 1, 1992. A cumulative effect benefit of $22.8
million related to the adoption of this standard is reflected in the 1992
Consolidated Statement of Income.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Postretirement Benefits Other Than Pensions

FAS No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions, required that employers accrue the cost and recognize the
liability for providing non-pension benefits to retired employees and
agents. Aetna and the Company implemented FAS No. 106 in 1992, retroactive
to January 1, 1992 on the immediate recognition basis. The cumulative
effect charge for all Aetna employees was reflected in Aetna's 1992
Statement of Income. A cumulative effect charge of $13.2 million, net of
taxes of $7.1 million, related to the adoption of this standard for Company
agents is reflected in the Company's 1992 Consolidated Statement of Income.

Cash and Cash Equivalents

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

Investments

Debt Securities

At December 31, 1994 and 1993, all of the Company's debt securities are
classified as available for sale and carried at fair value. These
securities are written down (as realized losses) for other than temporary
decline in value. Unrealized gains and losses related to these securities,
after deducting amounts allocable to experience-rated contractholders and
related taxes, are reflected in shareholder's equity.

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

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

Equity Securities

Equity securities are classified as available for sale and carried at fair
value based on quoted market prices or dealer quotations. Equity securities
are written down (as realized losses) for other than temporary declines in
value. Unrealized gains and losses related to such securities are reflected
in shareholder's equity. Purchases and sales are recorded on the trade
date.

The investment in affiliated mutual funds represents an investment in the
Aetna Series Fund, Inc., a retail mutual fund which has been seeded by the
Company, and is carried at fair value.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Mortgage Loans and Policy Loans

Mortgage loans and policy loans are carried at unpaid principal balances
net of valuation reserves, which approximates fair value, and are generally
secured. Purchases and sales of mortgage loans are recorded on the closing
date.

Limited Partnership

The Company's limited partnership investment is carried at the amount
invested plus the Company's share of undistributed operating results and
unrealized gains (losses), which approximates fair value.

Short-Term Investments

Short-term investments, consisting primarily of money market instruments
and other debt issues purchased with an original maturity of over ninety
days and less than one year, are considered available for sale and are
carried at fair value, which approximates amortized cost.

Deferred Policy Acquisition Costs

Certain costs of acquiring insurance business have been deferred. These
costs, all of which vary with and are primarily related to the production
of new business, consist principally of commissions, certain expenses of
underwriting and issuing contracts and certain agency expenses. For fixed
ordinary life contracts, such costs are amortized over expected
premium-paying periods. For universal life and certain annuity contracts,
such costs are amortized in proportion to estimated gross profits and
adjusted to reflect actual gross profits. These costs are amortized over
twenty years for annuity pension contracts, and over the contract period
for universal life contracts. Deferred policy acquisition costs are written
off to the extent that it is determined that future policy premiums and
investment income or gross profits would not be adequate to cover related
losses and expenses.

Insurance Reserve Liabilities

The Company's liabilities include reserves related to fixed ordinary life,
fixed universal life and fixed annuity contracts. Reserves for future
policy benefits for fixed ordinary life contracts are computed on the basis
of assumed investment yield, assumed mortality, withdrawals and expenses,
including a margin for adverse deviation, which generally vary by plan,
year of issue and policy duration. Reserve interest rates range from 2.25%
to 10.50%. Assumed investment yield is based on the Company's experience.
Mortality and withdrawal rate assumptions are based on relevant Aetna
experience and are periodically reviewed against both industry standards
and experience.

Reserves for fixed universal life (included in Future Policy Benefits) and
fixed deferred annuity contracts (included in Policyholders' Funds Left
With the Company) are equal to the fund value. The fund value is equal to
cumulative deposits less charges plus credited interest thereon, without
reduction for possible future penalties assessed on premature withdrawal.
For guaranteed interest options, the interest credited ranged from 4.00% to
5.85% in 1994 and

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4.00% to 7.68% in 1993. For all other fixed options, the interest credited
ranged from 5.00% to 7.50% in 1994 and 5.00% to 9.25% in 1993.

Reserves for fixed annuity contracts in the annuity period and for future
amounts due under settlement options are computed actuarially using the
Progressive Annuity Table (modified), the Annuity Table for 1949, the 1971
Individual Annuity Mortality Table, the 1971 Group Annuity Mortality Table,
the 1983 Individual Annuity Mortality Table and the 1983 Group Annuity
Mortality Table, at assumed interest rates ranging from 3.5% to 9.5%.
Reserves relating to contracts with life contingencies are included in
Future Policy Benefits. For other contracts, the reserves are reflected in
Policyholders' Funds Left With the Company.

Unpaid claims for all lines of insurance include benefits for reported
losses and estimates of benefits for losses incurred but not reported.

Premiums, Charges Assessed Against Policyholders, Benefits and Expenses

Premiums are recorded as revenue when due for fixed ordinary life
contracts. Charges assessed against policyholders' funds for cost of
insurance, surrender charges, actuarial margin and other fees are recorded
as revenue for universal life and certain annuity contracts. Policy
benefits and expenses are recorded in relation to the associated premiums
or gross profit so as to result in recognition of profits over the expected
lives of the contracts.

Separate Accounts

Assets held under variable universal life, variable life and variable
annuity contracts are segregated in Separate Accounts and are invested, as
designated by the contractholder or participant under a contract, in shares
of Aetna Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund,
Aetna Investment Advisers Fund, Inc., Aetna GET Fund, or The Aetna Series
Fund Inc., which are managed by the Company or other selected mutual funds
not managed by the Company.

Separate Accounts assets and liabilities are carried at fair value except
for those relating to a guaranteed interest option which is offered through
a Separate Account. The assets of the Separate Account supporting the
guaranteed interest option are carried at an amortized cost of $149.7
million for 1994 (fair value $146.3 million) and $31.2 million for 1993
(fair value $33.3 million), since the Company bears the investment risk
where the contract is held to maturity. Reserves relating to the guaranteed
interest option are maintained at fund value and reflect interest credited
at rates ranging from 4.5% to 8.38% in 1994 and from 4% to 9.45% in 1993.
Separate Accounts assets and liabilities are shown as separate captions in
the Consolidated Balance Sheets. Deposits, investment income and net
realized and unrealized capital gains (losses) of the Separate Accounts are
not reflected in the Consolidated Statements of Income (with the exception
of realized capital gains (losses) on the sale of assets supporting the
guaranteed interest option). The Consolidated Statements of Cash Flows do
not reflect investment activity of the Separate Accounts.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Federal Income Taxes

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

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2. INVESTMENTS

Investments in debt securities available for sale as of December 31, 1994
were as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obliga-
tions of U.S government agencies and
corporations........................ $ 1,396.1 $ 2.0 $ 84.2 $ 1,313.9
Obligations of states and political
subdivisions........................ 37.9 1.2 -- 39.1
U.S. Corporate securities:
Financial.......................... 2,216.9 3.8 109.4 2,111.3
Utilities.......................... 100.1 -- 7.9 92.2
Other.............................. 1,344.3 6.0 67.9 1,282.4
--------- ------ ------ ---------
Total U.S. Corporate securities.. 3,661.3 9.8 185.2 3,485.9
Foreign securities:
Government......................... 434.4 1.2 33.9 401.7
Financial.......................... 368.2 1.1 23.0 346.3
Utilities.......................... 204.4 2.5 9.5 197.4
Other.............................. 46.3 0.8 1.5 45.6
--------- ------ ------ ---------
Total Foreign securities......... 1,053.3 5.6 67.9 991.0
Residential mortgage-backed securi-
ties:
Residential pass-throughs.......... 627.1 81.5 5.0 703.6
Residential CMOs................... 2,671.0 32.9 139.4 2,564.5
--------- ------ ------ ---------
Total Residential mortgage-backed se-
curities............................ 3,298.1 114.4 144.4 3,268.1
Commercial/Multifamily mortgage-
backed securities................... 435.0 0.2 21.3 413.9
--------- ------ ------ ---------
Total Mortgage-backed securities. 3,733.1 114.6 165.7 3,682.0
Other loan-backed securities......... 696.1 0.2 16.8 679.5
--------- ------ ------ ---------
Total debt securities available for
sale................................ $10,577.8 $133.4 $519.8 $10,191.4
========= ====== ====== =========
</TABLE>

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Investments in debt securities available for sale as of December 31, 1993
were as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obliga-
tions of U.S. government agencies
and corporations.................... $ 827.2 $ 19.4 $ 6.6 $ 840.0
Obligations of states and political
subdivisions........................ 0.5 -- -- 0.5
U.S. Corporate securities:
Financial.......................... 983.3 49.2 0.7 1,031.8
Utilities.......................... 141.2 12.4 -- 153.6
Other.............................. 704.3 51.6 2.3 753.6
-------- ------ ----- ---------
Total U.S. Corporate securi-
ties.......................... 1,828.8 113.2 3.0 1,939.0
Foreign securities:
Government......................... 289.1 31.7 0.5 320.3
Financial.......................... 365.8 18.5 0.9 383.4
Utilities.......................... 206.2 28.9 0.1 235.0
Other.............................. 30.4 1.3 0.8 30.9
-------- ------ ----- ---------
Total Foreign securities....... 891.5 80.4 2.3 969.6
Residential mortgage-backed securi-
ties:
Residential pass-throughs.......... 1,125.0 218.1 1.7 1,341.4
Residential CMOs................... 4,868.7 318.1 1.1 5,185.7
-------- ------ ----- ---------
Total Residential mortgage-backed se-
curities............................ 5,993.7 536.2 2.8 6,527.1
Commercial/Multifamily mortgage-
backed securities................... 193.0 13.4 0.8 205.6
-------- ------ ----- ---------
Total Mortgage-backed securi-
ties.......................... 6,186.7 549.6 3.6 6,732.7
Other loan-backed securities......... 49.2 0.2 0.2 49.2
-------- ------ ----- ---------
Total debt securities available for
sale................................ $9,783.9 $762.8 $15.7 $10,531.0
======== ====== ===== =========
</TABLE>

At December 31, 1994 and 1993, net unrealized appreciation (depreciation)
of $(386.4) million and $747.1 million, respectively, on available for sale
debt securities included $(308.6) million and $582.8 million, respectively,
related to experience-rated contractholders, which were not included in
shareholder's equity.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The amortized cost and fair value of debt securities for the year ended
December 31, 1994 are shown below by contractual maturity. Actual
maturities may differ from contractual maturities because securities may be
restructured, called, or prepaid.

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- ---------
(millions)
<S> <C> <C>
Due to mature:
One year or less................................... $ 103.9 $ 103.5
After one year through five years.................. 1,965.6 1,920.0
After five years through ten years................. 2,371.3 2,207.0
After ten years.................................... 1,707.8 1,599.4
Mortgage-backed securities......................... 3,733.1 3,682.0
Other loan-backed securities....................... 696.1 679.5
--------- ---------
Total............................................ $10,577.8 $10,191.4
========= =========
</TABLE>

At December 31, 1994 and 1993, debt securities carried at $7.0 million and
$7.3 million, respectively, were on deposit as required by regulatory
authorities.

The valuation reserve for mortgage loans was $3.1 million and $4.2 million
at December 31, 1994 and 1993, respectively. The carrying value of
non-income producing investments was $0.2 million and $34.3 million at
December 31, 1994 and 1993, respectively.

Investments in a single issuer, other than obligations of the U.S.
government, with a carrying value in excess of 10% of the Company's
shareholder's equity at December 31, 1994 are as follows:

<TABLE>
<CAPTION>
AMORTIZED FAIR
DEBT SECURITIES COST VALUE
--------------- --------- ------
(millions)
<S> <C> <C>

General Electric Capital Corporation.................... $264.9 $252.1
General Motors Corporation.............................. 167.8 161.7
Society National Bank................................... 152.8 143.7
Ford Motor Company...................................... 144.7 142.3
Associates Corporation of North America................. 132.9 131.1
First Deposit Master Trust 1994-1A...................... 114.9 112.1
</TABLE>

The portfolio of debt securities at December 31, 1994 and 1993 included
$318 million and $329 million, respectively, (3% of the debt securities for
both years) of investments that are considered "below investment grade".
"Below investment grade" securities are defined to be securities that carry
a rating

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

below BBB-/Baa3, by Standard & Poors/Moody's Investor Services,
respectively. Of these below investment grade assets, $32 million and $39
million, at December 31, 1994 and 1993, respectively, were investments that
were purchased at investment grade, but whose ratings have since been
downgraded.

Included in residential mortgage-back securities are collateralized
mortgage obligations ("CMOs") with carrying values of $2.6 billion and $5.2
billion at December 31, 1994 and 1993, respectively. The $2.6 billion
decline in CMOs from December 31, 1993 to December 31, 1994 was related
primarily to sales and principal repayments. CMO sales of $1.6 billion
resulted in net realized capital gains of $35 million of which $23 million
was allocated to experience- rated contracts. The Company's CMO exposure
was reduced as a result of changes in their risk and return characteristics
and to better diversify the risk profile of the Company's assets. The
principal risks inherent in holding CMOs are prepayment and extension risks
related to dramatic decreases and increases in interest rates whereby the
CMOs would be subject to repayments of principal earlier or later than
originally anticipated. At December 31, 1994 and 1993, approximately 85%
and 93%, respectively, of the Company's CMO holdings consisted of
sequential and planned amortization class ("PAC") debt securities which are
subject to less prepayment and extension risk than other CMO instruments.
At December 31, 1994 and 1993, approximately 82% of the Company's CMO
holdings were collateralized by residential mortgage loans, on which the
timely payment of principal and interest was backed by specified government
agencies (e.g., GNMA, FNMA, FHLMC).

If due to declining interest rates, principal was to be repaid earlier than
originally anticipated, the Company could be affected by a decrease in
investment income due to the reinvestment of these funds at a lower
interest rate. Such prepayments may result in a duration mismatch between
assets and liabilities which could be corrected as cash from prepayments
could be reinvested at an appropriate duration to adjust the mismatch.

Conversely, if due to increasing interest rates, principal was to be repaid
slower than originally anticipated, the Company could be affected by a
decrease in cash flow which reduces the ability to reinvest expected

principal repayments at higher interest rates. Such slower payments may
result in a duration mismatch between assets and liabilities which could be
corrected as available cash flow could be reinvested at an appropriate
duration to adjust the mismatch.

At December 31, 1994 and 1993, 4% and 3%, respectively, of the Company's
CMO holdings consisted of interest-only strips (IOs) or principal-only
strips (POs). IOs receive payments of interest and POs receive payments of
principal on the underlying pool of mortgages. The risk inherent in holding
POs is extension risk related to dramatic increases in interest rates
whereby the future payments due on POs could be repaid much slower than
originally anticipated. The extension risks inherent in holding POs, PACs
and sequentials was mitigated by purchasing offsetting positions in IOs.
During dramatic increases in interest rates, IOs would generate more future
payments than originally anticipated.

The risk inherent in holding IOs is prepayment risk related to dramatic
decreases in interest rates whereby future IO cash flows could be much less
than originally anticipated and in some cases could be less than the
original cost of the IO. The risks inherent in IOs are mitigated by holding
offsetting positions in PO's, PACs, and sequentials. During dramatic
decreases in interest rates POs, PACs and sequentials would generate future
cash flows much quicker than originally anticipated.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In 1993, due to declining interest rates and prepayments on the underlying
pool of mortgages, the amortized cost on IO's was written down by $85.4
million. IO writedowns of $4.7 million, net of $80.7 million allocated to
experience-rated contracts, were reflected in 1993 net realized capital
gains (losses). In 1994, due to increasing interest rates, unrealized gains
on IO's increased from $0.5 million at December 31, 1993 to $17.8 million
at December 31, 1994. Conversely, unrealized gains on POs decreased from
$36.7 million at December 31, 1993 to $5.3 million at December 31, 1994.
1994 net realized gains (losses) included net gains of $10.0 million as a
result of sales of IOs and POs (including amounts allocated to
experience-rated contractholders).

The Company did not use derivative instruments (ie., futures, forward
contracts, interest swaps, etc.) for hedging or any other purposes in 1994
or 1993.

The Company does hold investments in certain debt and equity securities
with derivative characteristics (ie., including the fact that their market
value is at least partially determined by, among other things, levels of or
changes in interest rates, prepayment rates, equity markets or credit
ratings/spreads).

The amortized cost and fair value of these securities, included in the
$10.8 billion investment portfolio, as of December 31, 1994 was as follows:

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- --------
(millions)
<S> <C> <C>
Collateralized mortgage obligations (including
interest-only and principal-only strips)............ $2,671.0 $2,564.5
Treasury and agency strips:
Principal.......................................... 20.7 21.6
Interest........................................... 104.2 90.2
Mandatorily convertible preferred stock.............. 12.1 11.6
</TABLE>

Investments in available for sale equity securities were as follows:

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------- ---------- ---------- -------
(millions)
<S> <C> <C> <C> <C>
1994
Equity Securities...................... $ 230.5 $ 6.5 $7.9 $ 229.1
------- ----- ---- -------
1993
Equity Securities...................... $ 160.7 $12.0 $0.1 $ 172.6
------- ----- ---- -------
</TABLE>

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

At December 31, 1994 and 1993, 91% of outstanding policy loans had fixed
interest rates. The fixed interest rates for annuity policy loans ranged
from 1% to 3% for individual annuity policies in both 1994 and 1993. The
fixed interest rates for individual life policy loans ranged from 5% to 8%
in 1994 and 6% to 8% in 1993. The remaining outstanding policy loans had
variable interest rates averaging 8% in 1994 and 1993. Investment income
from policy loans was $11.5 million, $10.8 million and $9.5 million in
1994, 1993 and 1992, respectively.

Off-Balance Sheet Financial Instruments

At December 31, 1993, the Company had $149.0 million in outstanding forward
commitments to purchase mortgage-backed securities at a specified future
date and at a specified price or yield. These instruments involve elements
of market risk whereby future changes in market prices may make a financial
instrument less valuable. However, the difference between the fair value at
which the commitments can be settled, and the contractual value of these
securities, was immaterial at December 31, 1993. There were no outstanding
forward commitments at December 31, 1994.

There were no material concentrations of off-balance sheet financial
instruments at December 31, 1994 and 1993.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS

Realized capital gains or losses are the difference between proceeds
received from investments sold or prepaid, and amortized cost. Net realized
capital gains as reflected in the Consolidated Statements of Income are
after deductions for net realized capital gains (losses) allocated to
experience- rated contracts of $(29.1) million, $(54.8) million and $36.1
million for the years ended December 31, 1994, 1993, and 1992,
respectively. Net realized capital gains (losses) allocated to
experience-rated contracts are deferred and subsequently reflected in
credited rates on an amortized basis. Net unamortized gains (losses),
reflected as a component of Policyholders' Funds Left With the Company,
were $(50.7) million and $(16.5) million at the end of December 31, 1994
and 1993, respectively.

Changes to the mortgage loan valuation reserve and writedowns on debt
securities are included in net realized capital gains (losses) and amounted
to $1.1 million and $(98.5) million, of which $0.8 million and $(91.5)
million were allocable to experience-rated contractholders, for the years
ended December 31, 1994 and 1993, respectively. There were no changes to
the valuation reserve or writedowns in 1992. The 1993 losses were primarily
related to writedowns of interest-only mortgage-backed securities to their
fair value.

Net realized capital gains (losses) on investments, net of amounts
allocated to experience-rated contracts, were as follows:

<TABLE>
<CAPTION>
1994 1993 1992
---- ---- -----
(millions)
<S> <C> <C> <C>
Debt securities............................................ $1.0 $9.6 $12.9
Equity securities.......................................... 0.2 .1 0.5
Mortgage loans............................................. 0.3 (0.2) --
---- ---- -----
Pretax realized capital gains.............................. $1.5 $9.5 $13.4
==== ==== =====
After-tax realized capital gains........................... $1.0 $6.2 $ 8.8
==== ==== =====
</TABLE>

Gross gains of $26.6 million, $33.3 million and $13.9 million and gross
losses of $25.6 million, $23.7 million and $1.0 million were realized from
the sales of investments in debt securities in 1994, 1993 and 1992,
respectively.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Changes in unrealized capital gains (losses), excluding changes in
unrealized capital gains (losses) related to experience-rated contracts,
for the years ended December 31, were as follows:

<TABLE>
<CAPTION>
1994 1993 1992
------- ------ -----
(millions)
<S> <C> <C> <C>
Debt securities...................................... $(242.1) $164.3 $ --
Equity securities.................................... (13.3) 10.6 (0.1)
Limited partnership.................................. (1.8) -- --
------- ------ -----
(257.2) 174.9 (0.1)
Deferred federal income taxes (See Note 6)........... 46.3 61.2 --
------- ------ -----
Net change in unrealized capital gains (losses)...... $(303.5) $113.7 $(0.1)
======= ====== =====
</TABLE>

The net change in unrealized capital gains (losses) on debt securities in
1994 and 1993 resulted from the adoption of FAS No. 115. For the year ended
December 31, 1992, debt securities were carried at amortized cost. The
unrecorded net appreciation for debt securities carried at amortized cost
(including amounts allocable to experience-rated contracts) amounted to
$612.4 million at December 31, 1992.

Net unrealized capital gains (losses) allocable to experience-rated
contracts of $(308.6) million and $582.8 million at December 31, 1994 and
1993, respectively, are not included in shareholder's equity. These amounts
are reflected on the
Consolidated Balance Sheet in policyholders' funds left with the Company.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Shareholder's equity included the following unrealized capital gains
(losses), which are net of amounts allocable to experience-rated
contractholders, at December 31:

<TABLE>
<CAPTION>
1994 1993 1992
------- ------ ------
(millions)
<S> <C> <C> <C>
Debt securities
Gross unrealized capital gains.................... $ 27.4 $164.3 $ --
Gross unrealized capital losses................... (105.2) -- --
------- ------ ------
(77.8) 164.3 --
Equity securities
Gross unrealized capital gains.................... 6.5 12.0 2.0
Gross unrealized capital losses................... (7.9) (0.1) (0.7)
------- ------ ------
(1.4) 11.9 1.3
Limited Partnership
Gross unrealized capital gains.................... -- -- --
Gross unrealized capital losses................... (1.8) -- --
------- ------ ------
(1.8) -- --
Deferred federal income taxes (See Note 6).......... 108.0 61.7 0.5
------- ------ ------
Net unrealized capital gains (losses)............... $(189.0) $114.5 $ 0.8
======= ====== ======
</TABLE>

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. NET INVESTMENT INCOME

Sources of net investment income were as follows:

<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(millions)
<S> <C> <C> <C>
Debt securities.................................. $823.9 $828.0 $763.7
Preferred stock.................................. 3.9 2.3 2.8
Investment in affiliated mutual funds............ 5.2 2.9 3.2
Mortgage loans................................... 1.4 1.5 1.8
Policy loans..................................... 11.5 10.8 9.5
Reinsurance loan to affiliate.................... 51.5 53.3 56.7
Cash equivalents................................. 29.5 16.8 16.6
Other............................................ 6.7 7.7 6.4
------ ------ ------
Gross investment income.......................... 933.6 923.3 860.7
Less investment expenses......................... (16.4) (11.4) (12.6)
------ ------ ------
Net investment income............................ $917.2 $911.9 $848.1
====== ====== ======
</TABLE>

Net investment income includes amounts allocable to experience-rated
contractholders of $677.1 million, $661.3 million and $604.0 million for
the years ended December 31, 1994, 1993 and 1992, respectively. Interest
credited to contractholders is included in Current and Future Benefits.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5. DIVIDEND RESTRICTIONS AND SHAREHOLDER'S EQUITY

The amount of dividends that may be paid to the shareholder in 1995 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$70.9 million.

The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's equity those amounts determined
in conformity with statutory accounting practices prescribed or permitted
by the Department, which differ in certain respects from generally accepted
accounting principles. Statutory net income was $70.9 million, $77.6
million and $62.5 million for the years ended December 31, 1994, 1993 and
1992, respectively. Statutory shareholder's equity was $615.0 million and
$574.4 million as of December 31, 1994 and 1993, respectively.

As of December 31, 1994, the Company does not utilize any statutory
accounting practices which are not prescribed by insurance regulators that,
individually or in the aggregate, materially affect statutory shareholder's
equity.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. FEDERAL INCOME TAXES

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

As discussed in Note 1, the Company adopted FAS No. 109 as of January 1,
1992 resulting in a cumulative effect benefit of $22.8 million.

In August 1993, the Omnibus Budget Reconciliation Act of 1993 (OBRA) was
enacted which resulted in an increase in the federal corporate tax rate
from 34% to 35% retroactive to January 1, 1993. The enactment of OBRA
resulted in an increase in the deferred tax liability of $3.4 million at
date of enactment, which is included in the 1993 deferred tax expense.

Components of income tax expense (benefits) were as follows:

<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(millions)
<S> <C> <C> <C>
Current taxes (benefits):
Income from operations............................. $ 78.7 $ 87.1 $ 68.0
Net realized capital gains......................... (33.2) 18.1 18.1
------ ------ ------
45.5 105.2 86.1
------ ------ ------
Deferred taxes (benefits):
Income from operations............................. (8.0) (14.2) (17.7)
Net realized capital gains......................... 33.7 (14.8) (13.5)
------ ------ ------
25.7 (29.0) (31.2)
------ ------ ------
Total............................................ $ 71.2 $ 76.2 $ 54.9
====== ====== ======
</TABLE>

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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

<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(millions)
<S> <C> <C> <C>
Income before federal income taxes................... $216.5 $219.1 $168.1
Tax rate............................................. 35% 35% 34%
------ ------ ------
Application of the tax rate.......................... 75.8 76.7 57.2
------ ------ ------
Tax effect of:
Excludable dividends............................... (8.6) (8.7) (6.4)
Tax reserve adjustments............................ 2.9 4.7 5.1
Reinsurance transaction............................ 1.9 (0.2) (0.5)
Tax rate change on deferred liabilities............ -- 3.7 --
Other, net......................................... (0.8) -- (0.5)
------ ------ ------
Income tax expense............................... $ 71.2 $ 76.2 $ 54.9
====== ====== ======
</TABLE>

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities under FAS No. 109 at December 31, 1994
and 1993 are presented below:

<TABLE>
<CAPTION>
1994 1993
------ ------
(millions)
<S> <C> <C>
Deferred tax assets:
Insurance reserves........................................... $211.5 $195.4
Net unrealized capital losses................................ 136.3 --
Investment losses not currently deductible................... 15.5 31.2
Postretirement benefits other than pensions.................. 8.4 8.6
Impairment reserves.......................................... -- 7.9
Other........................................................ 28.3 19.3
------ ------
Total gross assets......................................... 400.0 262.4
Less valuation allowance....................................... 136.3 --
------ ------
Deferred tax assets net of valuation......................... 263.7 262.4
Deferred tax liabilities:
Deferred policy acquisition costs............................ 385.2 355.2
Unrealized losses allocable to experience-rated contracts.... 108.0 --
Market discount.............................................. 3.6 5.4
Net unrealized capital gains................................. -- 61.7
Other........................................................ 0.4 1.6
------ ------
Total gross liabilities.................................... 497.2 423.9
------ ------
Net deferred tax liability................................. $233.5 $161.5
====== ======
</TABLE>

Net unrealized capital gains and losses are presented in shareholder's
equity net of deferred taxes. At December 31, 1994, $81.0 million of net
unrealized capital losses were reflected in shareholder's 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 $28.3 million related to the net unrealized capital losses has been
reflected in shareholder's equity. In addition, $308.6 million of net
unrealized capital losses related to experience-rated contracts are not
reflected in shareholder's equity since such losses, if realized, are
allocable 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 $108.0 million has been reflected in
shareholder's equity as of December 31, 1994. 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

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

described above had no impact on net income for 1994, but has the potential
to adversely affect future results if such losses are realized.

The "Policyholders' Surplus Account," which arose under prior tax law, is
generally that portion of a life insurance company's statutory income that
has not been subject to taxation. As of December 31, 1983, no further
additions could be made to the Policyholders' Surplus Account for tax
return purposes under the Deficit Reduction Act of 1984. The balance in
such account was approximately $17.2 million at December 31, 1994. This
amount would be taxed only under certain conditions. No income taxes have
been provided on this amount since management believes the conditions under
which such taxes would become payable are remote.

The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1986. Discussions
are being held with the Service with respect to proposed adjustments.
However, management believes there are adequate defenses against, or
sufficient reserves to provide for, such adjustments. The Service has
commenced its examinations for the years 1987 through 1990.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. BENEFIT PLANS

Employee Pension Plans -- The Company, in conjunction with Aetna, has non-
contributory defined benefit pension plans covering substantially all
employees. The plans provide pension benefits based on years of service and
average annual compensation (measured over sixty consecutive months of
highest earnings in a 120 month period). Contributions are determined using
the Entry Age Normal Cost Method and, for qualified plans subject to ERISA
requirements, are limited to the amounts that are currently deductible for
tax reporting purposes. The accumulated benefit obligation and plan assets
are recorded by Aetna. The accumulated plan assets exceed accumulated plan
benefits. There has been no funding to the plan for the years 1992 through
1994, and therefore, no expense has been recorded by the Company.

Agent Pension Plans -- The Company, in conjunction with Aetna, has a non-
qualified pension plan covering certain agents. The plan provides pension
benefits based on annual commission earnings. The accumulated plan assets
exceed accumulated plan benefits. There has been no funding to the plan for
the years 1992 through 1994, and therefore, no expense has been recorded by
the Company.

Employee Postretirement Benefits -- In addition to providing pension
benefits, Aetna also provides certain postretirement health care and life
insurance benefits, subject to certain caps, for retired employees. Medical
and dental benefits are offered to all full-time employees retiring at age
50 with at least 15 years of service or at age 65 with at least 10 years of
service. Retirees are required to contribute to the plans based on their
years of service with Aetna.

Aetna implemented FAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions in 1992 on the immediate recognition basis.
The cumulative effect charge for all Aetna employees was reflected in
Aetna's 1992 Statement of Income. Prior to the adoption of FAS No. 106, the
cost of postretirement benefits was charged to operations as payments were
made. The accumulated benefit obligation and plan assets are recorded by
Aetna. Accumulated postretirement benefits exceed plan assets.

The cost to the Company associated with the Aetna postretirement plans for
1994, 1993 and 1992 were $1.0 million, $0.8 million and $0.8 million,
respectively.

Agent Postretirement Benefits -- The Company, in conjunction with Aetna,
also provides certain postemployment health care and life insurance
benefits for certain agents. The impact of recognizing the liability for
agent costs was a cumulative effect adjustment of $13.2 million (net of
deferred taxes of $6.8 million) and is reported in the 1992 Consolidated
Statement of Income.

The cost to the Company associated to the agents' postretirement plans for
1994, 1993 and 1992 were $0.7 million, $0.6 million and $0.7 million,
respectively.

Incentive Savings Plan -- Substantially all employees are eligible to
participate in a savings plan under which designated contributions, which
may be invested in common stock of Aetna or certain other investments, are
matched, up to 5% of compensation, by Aetna. Pretax charges to operations
for the incentive savings plan were $3.3 million, $3.1 million and $2.8
million in 1994, 1993 and 1992, respectively.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Stock Plans -- Aetna has a stock incentive plan that provides for stock
options and deferred contingent common stock or cash awards to certain key
employees. Aetna also has a stock option plan under which executive and
middle management employees of Aetna may be granted options to purchase
common stock of Aetna at the market price on the date of grant or, in
connection with certain business combinations, may be granted options to
purchase common stock on different terms. The cost to the Company
associated to the Aetna stock plans for 1994 and 1993 was $2.3 million,
$0.4 million, respectively. The cost for 1992 was immaterial.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8. RELATED PARTY TRANSACTIONS

The Company is compensated by the Separate Accounts for bearing mortality
and expense risks pertaining to variable life and annuity contracts. Under
the insurance contracts, the Separate Accounts pay the Company a daily fee
which, on an annual basis, ranges, depending on the product, from .70% to
1.80% of their average daily net assets. The Company also receives fees
from the variable life and annuity mutual funds and The Aetna Series Fund
for serving as investment adviser. Under the advisory agreements, the Funds
pay the Company a daily fee which, on an annual basis, ranges, depending on
the fund, from .25% to 1.00% of their average daily net assets. The
advisory agreements also call for the variable funds to pay their own
administrative expenses and for The Aetna Series Fund to pay certain
administrative expenses. The Company also receives fees (expressed as a
percentage of the average daily net assets) from The Aetna Series Fund for
providing administration shareholder services and promoting sales. The
amount of compensation and fees received from the Separate Accounts and
Funds, included in Charges Assessed Against Policyholders, amounted to
$104.6 million, $93.6 million and $80.5 million in 1994, 1993 and 1992,
respectively. The Company may waive advisory fees at its discretion.

The Company may, from time to time, make reimbursements to a Fund for some
or all of its operating expenses. Reimbursement arrangements may be
terminated at any time without notice.

Since 1981, all domestic individual non-participating life insurance of
Aetna and its subsidiaries has been issued by the Company. Effective
December 31, 1988, the Company entered into a reinsurance agreement with
Aetna Life Insurance Company ("Aetna Life") in which substantially all of
the non- participating individual life and annuity business written by
Aetna Life prior to 1981 was assumed by the Company. A $108.0 million
commission, paid by the Company to Aetna Life in 1988, was capitalized as
deferred policy acquisition costs. The Company maintained insurance
reserves of $690.3 million and $711.0 million as of December 31, 1994 and
1993, respectively, relating to the business assumed. In consideration for
the assumption of this business, a loan was established relating to the
assets held by Aetna Life which support the insurance reserves. The loan is
being reduced in accordance with the decrease in the reserves. The fair
value of this loan was $630.3 million and $685.8 million as of December 31,
1994 and 1993, respectively, and is based upon the fair value of the
underlying assets. Premiums of $32.8 million, $33.3 million and $36.8
million and current and future benefits of $43.8 million, $55.4 million and
$47.2 million were assumed in 1994, 1993 and 1992, respectively.

Investment income of $51.5 million, $53.3 million and $56.7 million was
generated from the reinsurance loan to affiliate in 1994, 1993 and 1992,
respectively. Net income of approximately $25.1 million, $13.6 million and
$21.7 million resulted from this agreement in 1994, 1993 and 1992,
respectively.

On December 16, 1988, the Company assumed $25.0 million of premium revenue
from Aetna Life for the purchase and administration of a life contingent

single premium variable payout annuity contract. In addition, the Company
also is responsible for administering fixed annuity payments that are made
to annuitants receiving variable payments. Reserves of $24.2 million and
$27.8 million were maintained for this contract as of December 31, 1994 and
1993, respectively.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Effective February 1, 1992, the Company increased its retention limit per
individual life to $2.0 million and entered into a reinsurance agreement
with Aetna Life to reinsure amounts in excess of this limit, up to a
maximum of $8.0 million on any new individual life business, on a yearly
renewable term basis. Premium amounts related to this agreement for 1994,
1993 and 1992 were immaterial.

Effective December 31, 1992, the Company entered into an assumption
reinsurance agreement with Aetna Life to reinsure a block of approximately
3,500 life contingent, period certain and deferred lump sum annuities
(totaling $175.5 million in premium) issued by the Company to Aetna
Casualty to fund its obligations under structured settlement agreements.
The negotiated price recognized the sale of future profits and included
consideration to ALIAC for the continued administration of the reinsured
contracts on behalf of, and in the name of, Aetna Life.

The Company received no capital contributions in 1994, 1993 or 1992.

Premiums due and other receivables include $27.6 million and $9.8 million
due from affiliates in 1994 and 1993, respectively. Other liabilities
include $27.9 million and $26.1 million due to affiliates for 1994 and
1993, respectively.

Substantially all of the administrative and support functions of the
Company are provided by Aetna and its affiliates. The financial statements
reflect allocated charges for these services based upon measures
appropriate for the type and nature of service provided.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. REINSURANCE

The Company utilizes indemnity reinsurance agreements to reduce its
exposure to large losses in all aspects of its insurance business. Such
reinsurance permits recovery of a portion of losses from reinsurers,
although it does not discharge the primary liability of the Company as
direct insurer of the risks reinsured. The Company evaluates the financial
strength of potential reinsurers and continually monitors the financial
condition of reinsurers. Only those reinsurance recoverables deemed
probable of recovery are reflected as assets on the Company's Consolidated
Balance Sheets.

The following table includes premium amounts ceded/assumed to/from
affiliated companies as discussed in Note 8 above.

<TABLE>
<CAPTION>
CEDED TO ASSUMED
DIRECT OTHER FROM OTHER NET
AMOUNT COMPANIES COMPANIES AMOUNT
------ --------- ---------- ------
(millions)
<S> <C> <C> <C> <C>
1994
Premiums:
Life Insurance............................ $ 25.8 $ 6.0 $32.8 $ 52.6
Accident and Health Insurance............. 10.8 9.3 -- 1.5
Annuities................................. 69.9 -- 0.2 70.1
------ ----- ----- ------
Total earned premiums................... $106.5 $15.3 $33.0 $124.2
====== ===== ===== ======
1993
Premiums:
Life Insurance............................ $ 20.9 $ 5.6 $33.3 $ 48.6
Accident and Health Insurance............. 14.4 12.9 -- 1.5
Annuities................................. 31.3 -- 0.7 32.0
------ ----- ----- ------
Total earned premiums................... $ 66.6 $18.5 $34.0 $ 82.1
====== ===== ===== ======
1992
Premiums:
Life Insurance............................ $ 20.8 $ 5.2 $36.8 $ 52.4
Accident and Health Insurance............. 15.1 13.7 -- 1.4
Annuities................................. 18.4 -- 0.3 18.7
------ ----- ----- ------
Total earned premiums................... $ 54.3 $18.9 $37.1 $ 72.5
====== ===== ===== ======
</TABLE>

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

10. FINANCIAL INSTRUMENTS

The carrying values and estimated fair values of the Company's financial
instruments at December 31, 1994 and 1993 were as follows:

<TABLE>
<CAPTION>
1994 1993
------------------- -------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
--------- --------- --------- ---------
(millions)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents............. $ 623.3 $ 623.3 $ 536.1 $ 536.1
Short-term investments................ 98.0 98.0 22.6 22.6
Debt securities....................... 10,191.4 10,191.4 10,531.0 10,531.0
Equity securities..................... 229.1 229.1 172.6 172.6
Limited partnership................... 24.4 24.4 -- --
Mortgage loans........................ 9.9 9.9 10.1 10.1
Liabilities:
Investment contract liabilities:
With a fixed maturity............... 826.7 833.5 733.3 795.6
Without a fixed maturity............ 8,074.9 7,870.4 8,196.4 8,099.3
</TABLE>

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

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

Short-term instruments: Fair values are based on quoted market prices or
dealer quotations. Where quoted market prices are not available, the
carrying amounts reported in the Consolidated Balance Sheets approximates
fair value. Short-term instruments have a maturity date of one year or less
and include cash and cash equivalents, and short-term investments.

Debt and equity securities: Fair values are based on quoted market prices
or dealer quotations. Where quoted market prices or dealer quotations are

not available, fair value is estimated by using quoted market prices for
similar securities or discounted cash flow methods.

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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

Investment contract liabilities (included in Policyholders' Funds Left With
the Company): With a fixed maturity: Fair value is estimated by discounting
cash flows at interest rates currently being offered by, or available to,
the Company for similar contracts.

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

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

11. SEGMENT INFORMATION

Effective December 31, 1994, the Company's operations, which previously
were reported in total, will now be reported through two major business
segments: Life Insurance and Financial Services. The Life Insurance segment
markets most types of life insurance including universal life,
interest-sensitive whole life, and term insurance. These products are
offered primarily to individuals, small businesses, employer-sponsored
groups and executives of Fortune 2000 companies. The Financial Services
segment markets and services individual and group annuity contracts which
offer a variety of funding and distribution options for personal and
employer-sponsored retirement plans that qualify for tax deferral under
sections 401(k) for corporations, 403(b) for hospitals and educational
institutions, 408 for individual retirement accounts, and 457 for state and
local governments and tax exempt healthcare organizations (the "deferred
compensation market"), of the Internal Revenue Code. These contracts may be
immediate or deferred. These products are offered primarily to individuals,
pension plans, small businesses and employer-sponsored groups.

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

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(millions)
<S> <C> <C> <C>
Revenue:
Life insurance................................. $ 386.1 $ 371.7 $ 363.6
Financial services............................. 946.1 892.8 812.5
--------- --------- ---------
Total revenue................................ $ 1,332.2 $ 1,264.5 $ 1,176.1
========= ========= =========
Income from continuing operations before income
taxes and cumulative effect adjustments:
Life insurance................................. $ 96.8 $ 98.0 $ 74.6
Financial services............................. 119.7 121.1 93.5
--------- --------- ---------
Total income from continuing operations be-
fore income taxes and cumulative effect ad-
justments................................... $ 216.5 $ 219.1 $ 168.1
Net income:
Life insurance................................. $ 59.8 $ 56.1 $ 45.6
Financial services............................. 85.5 86.8 67.6
--------- --------- ---------
Income before cumulative effect adjustments.. $ 145.3 $ 142.9 $ 113.2
--------- --------- ---------
Cumulative effect adjustments................ -- -- 9.6
--------- --------- ---------
Net income....................................... $ 145.3 $ 142.9 $ 122.8
========= ========= =========

</TABLE>

AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(millions)
<S> <C> <C> <C>
Assets under management, at fair value:
Life insurance................................. $ 2,175.2 $ 2,180.1 $ 1,973.1
Financial services............................. 17,791.9 16,600.5 13,644.3
--------- --------- ---------
Total assets under management................ $19,967.1 $18,780.6 $15,617.4
========= ========= =========
</TABLE>

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