
<PAGE> 1

                SECURITIES AND EXCHANGE COMMISSION

                       Washington, D.C.  20549

                             Form 10-Q

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


For the quarterly period ended  March 31, 1996 
                               ________________


Commission file number  1-5704 
                       ________


                    Aetna Life and Casualty Company                        
___________________________________________________________________________
(Exact name of registrant as specified in its charter)


          Connecticut                             06-0843808               
___________________________________________________________________________
(State or other jurisdiction of                (I.R.S. Employer
 incorporation or organization)                 Identification No.)


151 Farmington Avenue, Hartford, Connecticut           06156               
___________________________________________________________________________
(Address of principal executive offices)             (ZIP Code)


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




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


     Yes    X        No  _____
          _____               


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


                                            Shares Outstanding
   Title of Class                           at March 31, 1996 
  ________________                          __________________


Common Capital Stock                           115,187,158
 without par value


<PAGE> 2

                             TABLE OF CONTENTS
                             _________________


                                                           Page
                                                           ____

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

         Consolidated Statements of Income                   3
         Consolidated Balance Sheets                         4
         Consolidated Statements of Shareholders'
           Equity                                            6
         Consolidated Statements of Cash Flows               7
         Condensed Notes to Financial Statements             8
         Independent Auditors' Review Report                19

Item 2.  Management's Discussion and Analysis of
           Financial Condition and Results of
           Operations.                                      20


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.                                 48

Item 5.  Other Information.                                 48

Item 6.  Exhibits and Reports on Form 8-K.                  49


Signatures                                                  51

<PAGE> 3

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

                AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>

<CAPTION>

                                                                          Three Months Ended
                                                                               March 31,         
                                                                   ______________________________
(Millions, except share and per share data)                        1996             1995
                                                                   ____             ____

<S>                                                                <C>              <C>

Revenue:
  Premiums.............................................            $    1,843.9     $     1,882.1
  Net investment income................................                   886.3             870.0
  Fees and other income................................                   518.2             453.4
  Net realized capital gains (losses)..................                    62.0             (13.2)
                                                                   ____________     _____________ 
      Total revenue....................................                 3,310.4           3,192.3
                                                                   ____________     _____________

Benefits and expenses:
  Current and future benefits..........................                 2,236.9           2,275.7
  Operating expenses...................................                   790.2             741.2
  Amortization of deferred policy acquisition costs....                    37.0              32.0
                                                                   ____________     _____________
      Total benefits and expenses......................                 3,064.1           3,048.9
                                                                   ____________     _____________
  
Income from continuing operations before income 
  taxes................................................                   246.3             143.4
Federal and foreign income taxes (benefits):
  Current..............................................                    62.8             (22.2)
  Deferred.............................................                    18.0              73.2
                                                                   ____________     _____________
      Total federal and foreign income taxes...........                    80.8              51.0
                                                                   ____________     _____________

Income from continuing operations......................                   165.5              92.4
Income from Discontinued Operations, net of tax........                   182.2              68.4
                                                                   ____________     _____________

      Net income.......................................            $      347.7     $       160.8
                                                                   ____________     _____________
                                                                   ____________     _____________

Results per common share:
  Income from continuing operations...................             $       1.43     $         .82
  Income from Discontinued Operations, net of tax.....                     1.57               .60
                                                                   ____________     _____________
  Net income..........................................             $       3.00     $        1.42
                                                                   ____________     _____________
                                                                   ____________     _____________
  Dividends declared..................................             $        .69     $         .69
                                                                   ____________     _____________
                                                                   ____________     _____________

  Weighted average common shares outstanding..........              115,765,475       112,949,522
                                                                   ____________     _____________
                                                                   ____________     _____________

<FN>

See Condensed Notes to Financial Statements.

</TABLE>


<PAGE> 4

         AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS

<TABLE>

<CAPTION>

                                              March 31,       December 31,
(Millions)                                      1996              1995    
                                            _____________     ____________

<S>                                         <C>               <C>

Assets:
Investments:
  Debt securities:
   Available for sale, at fair value
     (amortized cost $29,687.7 and
      $29,962.5)......................      $ 30,344.9        $ 31,860.3
  Equity securities, at fair value
   (cost $785.1 and $597.8)...........           929.1             659.7
Short-term investments................           637.5             607.8
Mortgage loans........................         7,947.8           8,327.2
Real estate...........................         1,301.9           1,277.3
Policy loans..........................           639.2             629.4
Other.................................           689.4             688.6
                                             _________        __________
      Total investments...............        42,489.8          44,050.3
Cash and cash equivalents.............         1,558.5           1,712.7
Accrued investment income.............           586.7             618.3
Premiums due and other receivables....         1,161.9           1,080.9
Deferred federal and foreign income 
 taxes................................           402.2             271.5
Deferred policy acquisition costs.....         2,006.7           1,953.1
Other assets..........................         1,020.8           1,004.4
Separate Accounts assets..............        31,128.9          29,699.7
                                                                        
Net assets of Discontinued 
 Operations...........................         3,746.7           3,932.8
                                            __________        __________
      Total assets....................      $ 84,102.2        $ 84,323.7
                                            __________        __________
                                            __________        __________

<FN>

See Condensed Notes to Financial Statements.

</TABLE>


<PAGE> 5

        AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

                   CONSOLIDATED BALANCE SHEETS
                           (Continued)

<TABLE>

<CAPTION>

                                                         March 31,       December 31,
(Millions, except share and per share data)                1996              1995    
                                                       _____________     ____________

<S>                                                    <C>               <C>

Liabilities:
  Future policy benefits........................       $ 18,459.6        $ 18,372.9
  Unpaid claims and claim expenses..............          1,478.8           1,563.1
  Unearned premiums.............................            159.0             142.4
  Policyholders' funds left with the company....         21,702.6          22,898.7
                                                       __________        __________
      Total insurance liabilities...............         41,800.0          42,977.1
  Dividends payable to shareholders.............             79.5              79.2
  Short-term debt...............................            388.4             389.6
  Long-term debt................................            985.5             989.1
  Current federal and foreign income taxes......            150.6             154.0
  Other liabilities.............................          2,134.1           2,344.2
  Participating policyholders' interests........            194.3             204.8
  Separate Accounts liabilities.................         31,066.8          29,637.9
                                                       __________        __________
      Total liabilities.........................         76,799.2          76,775.9
                                                       __________        __________

  Minority interest in preferred
   securities of subsidiary.....................            275.0             275.0
                                                       __________        __________

Shareholders' Equity:
  Class A Voting Preferred Stock (no par
   value; 10,000,000 shares authorized;
   no shares issued or outstanding).............                -                 -
  Class B Voting Preferred Stock (no par
   value; 15,000,000 shares authorized;
   no shares issued or outstanding).............                -                 -
  Class C Non-Voting Preferred Stock (no
   par value; 15,000,000 shares authorized;
   no shares issued or outstanding).............                -                 -
  Common Capital Stock (no par value;
   250,000,000 shares authorized;
   115,473,773 and 115,013,675 issued, and 
   115,187,158 and 114,727,093 outstanding).....          1,473.5           1,448.2
  Net unrealized capital gains..................            103.2             641.1
  Retained earnings.............................          5,463.4           5,195.6
  Treasury stock, at cost (286,615 and
   286,582 shares)..............................            (12.1)            (12.1)
                                                       __________        __________ 

      Total shareholders' equity................          7,028.0           7,272.8
                                                       __________        __________

      Total liabilities, minority interest and
       shareholders' equity.....................       $ 84,102.2        $ 84,323.7
                                                       __________        __________
                                                       __________        __________

  Shareholders' equity per common share.........       $    61.01        $    63.39
                                                       __________        __________
                                                       __________        __________

<FN>

See Condensed Notes to Financial Statements.

</TABLE>


<PAGE> 6

                AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>

<CAPTION>

(Millions, except share data)

                                                                   Net
                                                      Common       Unrealized
                                                      Capital      Capital           Retained     Treasury
Three Months Ended March 31, 1996       Total         Stock        Gains (Losses)    Earnings     Stock   
__________________________________________________________________________________________________________

<S>                                     <C>           <C>          <C>               <C>          <C>

Balances at December 31, 1995           $7,272.8      $1,448.2     $   641.1         $5,195.6     $  (12.1)
__________________________________________________________________________________________________________ 

Net income............................     347.7                                        347.7
Change in net unrealized capital gains
  and losses..........................    (537.9)                     (537.9)
Common stock issued for benefit plans
  (460,098 shares)....................      25.3          25.3
Common stock dividends declared.......     (79.9)                                       (79.9)            
                                        __________________________________________________________________


Balances at March 31, 1996              $7,028.0      $1,473.5     $   103.2         $5,463.4      $ (12.1)
__________________________________________________________________________________________________________ 
                                        __________________________________________________________________ 




Three Months Ended March 31, 1995                                                                         
__________________________________________________________________________________________________________

<S>                                     <C>           <C>          <C>               <C>          <C>

Balances at December 31, 1994           $5,503.0      $1,419.2     $(1,071.5)        $5,259.6     $ (104.3)
__________________________________________________________________________________________________________ 

Net income............................     160.8                                        160.8
Change in net unrealized capital gains
  and losses..........................     633.3                       633.3
Common stock issued for benefit plans
  (102,053 shares)....................       5.1                                                       5.1
Loss on issuance of treasury stock....      (1.1)         (1.1)
Common stock dividends declared.......     (77.8)                                       (77.8)            
                                        __________________________________________________________________


Balances at March 31, 1995              $6,223.3      $1,418.1     $  (438.2)        $5,342.6     $  (99.2)
__________________________________________________________________________________________________________ 
                                        __________________________________________________________________ 

<FN>

See Condensed Notes to Financial Statements.

</TABLE>


<PAGE> 7

              AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                           Three Months Ended
                                                                                March 31,       
                                                                        ________________________
(Millions)                                                              1996           1995
                                                                        ____           ____
<S>                                                                     <C>            <C>

Cash Flows from Operating Activities:
   Net income........................................................   $    347.7     $   160.8
   Adjustments to reconcile net income to net
    cash used for operating activities:
      Income from Discontinued Operations............................       (182.2)        (68.4)
      Decrease in accrued investment income..........................         31.7          30.4
      Increase in premiums due and other receivables.................        (37.3)       (210.7)
      Increase in deferred policy acquisition costs..................        (51.7)        (43.4)
      Depreciation and amortization..................................         49.5          44.1
      Decrease in federal and foreign income taxes...................       (135.2)        (89.6)
      Net (decrease) increase in other assets and other liabilities..       (264.3)        229.5
      Decrease in insurance reserve liabilities......................       (199.8)        (47.5)
      Net realized capital (gains) losses............................        (62.0)         13.2
      Amortization of net investment discounts.......................        (26.5)        (33.7)
      Other, net.....................................................         (8.9)        (52.1)
   Discontinued Operations, net......................................       (369.0)         66.1
                                                                        __________     _________
        Net cash used for operating activities.......................       (908.0)         (1.3)
                                                                        __________     _________ 
Cash Flows from Investing Activities:
   Proceeds from sales of:
      Debt securities available for sale.............................      3,407.9       2,544.4
      Equity securities..............................................        108.5         336.7
      Mortgage loans.................................................          8.7           4.3
      Real estate....................................................         47.7          32.2
      Short-term investments.........................................      6,757.2      11,225.7
   Investment maturities and repayments of:
      Debt securities available for sale.............................        700.1         423.1
      Debt securities held for investment............................            -         128.5
      Mortgage loans.................................................        407.6         495.6
   Cost of investments in:
      Debt securities available for sale.............................     (3,749.0)     (3,123.1)
      Debt securities held for investment............................            -          (8.2)
      Equity securities..............................................       (352.4)        (29.2)
      Mortgage loans.................................................        (53.8)        (45.9)
      Real estate....................................................        (34.1)        (25.1)
      Short-term investments.........................................     (6,736.8)    (11,272.5)
   Increase in property and equipment................................         (4.1)        (37.1)
   Net increase in Separate Accounts.................................         (0.4)        (14.5)
   Other, net........................................................        206.7        (193.8)
   Discontinued Operations, net......................................       (261.8)        224.8
                                                                        __________     _________
        Net cash provided by investing activities....................        452.0         665.9
                                                                        __________     _________
Cash Flows from Financing Activities:
   Deposits and interest credited for investment contracts...........        618.9         209.6
   Withdrawals of investment contracts...............................       (901.3)       (706.2)
   Issuance of long-term debt........................................         24.9             -
   Stock issued under benefit plans..................................         25.3           4.0
   Repayment of long-term debt.......................................        (28.8)         (1.4)
   Net (decrease) increase in short-term debt........................         (1.3)         83.1
   Dividends paid to shareholders....................................        (79.9)        (77.8)
   Corporate expenses paid by Discontinued Operations................         12.5          14.8
   Discontinued Operations, net......................................            -           (.2)
                                                                        __________      ________ 
        Net cash used for financing activities.......................       (329.7)       (474.1)
                                                                        __________      ________ 
Effect of exchange rate changes on cash and cash
   equivalents.......................................................          0.4           (.1)
Net decrease (increase) in cash and cash equivalents of 
 Discontinued Operations.............................................        631.1        (290.4)
                                                                        __________     _________ 
Net decrease in cash and cash equivalents............................       (154.2)       (100.0)
Cash and cash equivalents, beginning of period.......................      1,712.7       2,277.2
                                                                        __________     _________
Cash and cash equivalents, end of period.............................   $  1,558.5     $ 2,177.2
                                                                        __________     _________
                                                                        __________     _________

Supplemental Cash Flow Information - continuing operations:
   Interest paid.....................................................   $     44.6     $    42.8
                                                                        __________     _________
                                                                        __________     _________
   Income taxes paid ................................................   $     59.0     $     4.0
                                                                        __________     _________
                                                                        __________     _________
<FN>
See Condensed Notes to Financial Statements.
</TABLE>

<PAGE> 8

     AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS

(1)  Basis of Presentation

The consolidated financial statements include Aetna Life and 
Casualty Company and its majority-owned subsidiaries 
(collectively, the "company").  The company's property-casualty 
operations are reflected as Discontinued Operations.  The company 
completed the sale of its property-casualty operations to an 
affiliate of the Travelers Insurance Group Inc. ("Travelers") on 
April 2, 1996 (please refer to Note 4). Less than majority-owned 
entities in which the company has at least a 20% interest are 
reported on the equity basis.  These consolidated financial 
statements have been prepared in accordance with generally 
accepted accounting principles and are unaudited.  Certain 
reclassifications have been made to 1995 financial information to 
conform to the 1996 presentation.  These interim statements 
necessarily rely heavily on estimates, including assumptions as to 
annualized tax rates.  In the opinion of management, all 
adjustments necessary for a fair statement of results for the 
interim periods have been made.  All such adjustments are of a 
normal, recurring nature.

(2)  Agreement to Merge with U.S. Healthcare

The company and U.S. Healthcare, Inc. ("U.S. Healthcare") 
entered into an agreement, dated as of March 30, 1996,  
pursuant to which they agreed to merge in a transaction, valued 
at that time, at approximately $8.9 billion.  The merger 
agreement, which has been approved by the board of directors of 
each company, calls for the formation of a new holding company, 
Aetna Inc. U.S. Healthcare shareholders will receive $34.20 in 
cash, 0.2246 shares of Aetna Inc. common stock and 0.0749 
shares of Aetna Inc. mandatorily convertible preferred stock 
for each share of U.S. Healthcare common stock and each share 
of U.S. Healthcare Class B Stock outstanding.  Each outstanding 
share of the company's common stock will become a share of 
common stock of Aetna Inc.  Immediately after the transaction, 
the company and U.S. Healthcare will each be wholly-owned 
subsidiaries of Aetna Inc., and Aetna Inc. will be owned 
approximately 78% by the company's shareholders and 
approximately 22% by U.S. Healthcare shareholders 
(approximately 72% and approximately 28%, respectively, on a 
fully diluted basis).

The company expects to finance the transaction with a 
combination of $5.3 billion in cash ($3.9 billion from the net 
proceeds received from the sale of its property-casualty 
operations and $1.4 billion of additional bank debt, which may 
initially be financed with commercial paper) and the issuance 
of $2.7 billion of new Aetna Inc. common stock and $0.9 billion 
of Aetna Inc. mandatorily convertible preferred stock.  The 
agreement is subject to approval by the shareholders of both 
companies, expiration of the waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, receipt of 
required insurance, healthcare and other regulatory approvals, 
and other customary conditions.  It is expected to close in the 
third quarter of 1996.

<PAGE> 9

     AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(3) Accounting Changes

Financial Accounting Standard ("FAS") No. 123, Accounting for 
Stock-Based Compensation, is effective for 1996 reporting.  This 
statement addresses the accounting for the cost of stock-based 
compensation, such as stock options.  FAS No. 123 permits either 
expensing the cost of stock-based compensation over the vesting 
period or disclosing in the financial statement footnotes what 
this expense would have been.  This cost would be measured at the 
grant date based upon estimated fair values, using option pricing 
models.  The company has selected the disclosure alternative which 
requires that such disclosures be included in full year financial 
statements only.

(4)  Sales of Subsidiaries

On April 2, 1996, the company completed the sale of its property-
casualty operations to Travelers for approximately $4.1 billion in 
cash.  The sale resulted in a gain of approximately $265 million 
(after tax) which will be reflected in the second quarter of 1996.  
The operating results of the property-casualty operations are 
presented as Discontinued Operations for the three months ended 
March 31, 1996 and 1995.

Results of Discontinued Operations for the three months ended 
March 31, were:

<TABLE>
<CAPTION>

(Millions)                                                         1996             1995     
_____________________________________________________________________________________________
<S>                                                                <C>              <C>

Revenue:

  Premiums                                                         $  1,038.4       $ 1,046.9
  Net investment income                                                 242.9           215.9
  Fees and other income                                                  18.3            22.6
  Net realized capital gains                                            239.7             6.8
                                                                   __________________________

   Total revenue                                                      1,539.3         1,292.2
_____________________________________________________________________________________________

Claims and expenses:

  Claims and claim adjustment expenses                                  964.0           842.1
  Operating expenses                                                    151.9           198.5
  Amortization of deferred policy acquisition costs                     160.7           155.1
                                                                   __________________________

   Total claims and expenses                                          1,276.6         1,195.7
_____________________________________________________________________________________________

Income before income taxes                                              262.7            96.5

Federal and foreign income taxes                                         80.5            28.1
                                                                   __________________________
                                                                                             

Net income                                                         $    182.2       $    68.4
                                                                   __________________________
                                                                   __________________________


</TABLE>

<PAGE> 10

     AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(4) Sales of Subsidiaries (Continued)

The Balance Sheets of the Discontinued Operations were:

<TABLE>
<CAPTION>                                              March 31,    December 31,
(Millions)                                                  1996            1995
________________________________________________________________________________
<S>                                                    <C>           <C>

Assets:
Investments:
 Debt securities:
    Available for sale, at fair value 
      (amortized cost $12,854.5 and $11,293.8)        $12,836.8        $11,705.6
 Equity securities, at fair value
  (cost $53.3 and $313.8)                                  60.1            525.5
 Short-term investments                                      .2            137.2
 Mortgage loans                                         1,012.8          1,061.7
 Real estate                                              255.9            264.7
 Other                                                    140.9            291.8
                                                      __________________________
   Total investments                                   14,306.7         13,986.5

Cash and cash equivalents                                 522.5          1,153.6
Reinsurance recoverables and receivables                5,067.5          5,144.0
Accrued investment income                                 210.2            188.3
Premiums due and other receivables                      1,079.1          1,057.4
Federal and foreign income taxes:
  Current                                                     -             13.6
  Deferred                                                777.2            642.3
Deferred policy acquisition costs                         296.1            305.8
Other assets                                            1,033.5          1,010.9
                                                      __________________________
   Total assets                                       $23,292.8        $23,502.4
________________________________________________________________________________
                                                      __________________________

Liabilities:
Unpaid claims and claim expenses                      $16,726.2        $16,569.3
Unearned premiums                                       1,386.2          1,400.3
Policyholders' funds left with the companies               40.5             39.1
                                                     ___________________________
   Total insurance liabilities                         18,152.9         18,008.7
Long-term debt                                             35.2             35.2
Current federal income taxes                                1.8                -
Other liabilities                                       1,356.2          1,525.7
                                                      __________________________
   Total liabilities                                   19,546.1         19,569.6

Total shareholder's equity (including 
 net unrealized capital (losses) gains of
 $(65.2) and $303.1)                                    3,746.7          3,932.8
________________________________________________________________________________

Total liabilities and shareholder's equity            $23,292.8        $23,502.4
________________________________________________________________________________
                                                      __________________________
</TABLE>

In conjunction with the sale, Travelers subleased the space 
currently occupied by the company in the CityPlace office facility 
in Hartford for eight years at current market rates.  The company 
will reflect a charge of approximately $190 million (after tax) in 
the second quarter of 1996 representing the present value of the 
difference between rent required to be paid by the company under 
the lease and future rentals expected to be received by the 
company.  The company also expects to reflect additional severance 
and facilities charges in the second quarter of 1996 of 
approximately $45 million (after tax) due to actions expected to 
be taken to reduce the level of corporate expenses and other costs 
previously absorbed by the property-casualty operations.

<PAGE> 11

     AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(4) Sales of Subsidiaries (Continued)

As a result of the sale, the company retained no property-
casualty liabilities other than those associated with  
indemnifying Travelers for a portion of certain potential 
liability exposures.  While there can be no assurances, 
management currently does not believe that the aggregate 
ultimate loss arising from these indemnifications, if any, will 
be material to the annual net income, liquidity or financial 
condition of the company, although it is reasonably possible. 

(5)  Discontinued Products

Results of discontinued fully guaranteed large case pension 
products (guaranteed investment contracts ("GICs") and single-
premium annuities ("SPAs")) for the three months ended March 31, 
1996 and 1995 were credited/charged to the reserve for anticipated 
future losses and did not affect the company's results of 
operations. Future net losses (including capital losses) for each 
product will be charged to the respective reserve at the time such 
losses are realized.  Management believes the reserve for 
anticipated losses at March 31, 1996 is adequate to provide for 
future net losses associated with the guaranteed product 
liabilities. To the extent that actual future losses are greater 
than anticipated future net losses, the company's results of 
operations would be adversely affected.  Conversely, if actual 
future losses are less than anticipated future losses, the 
company's results of operations would be favorably affected.  
(Please refer to the company's 1995 Annual Report to Shareholders 
for a more complete discussion of the reserve for anticipated 
future losses on discontinued products.)

<PAGE> 12

     AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(5) Discontinued Products (Continued)

Results of discontinued products were as follows (pretax, in 
millions):

<TABLE>
<CAPTION>
                                                                                 Charged
                                                                                 (Credited) to
                                        Guaranteed    Single-                    Reserve for
                                        Investment    Premium                    Future
Three months ended March 31, 1996       Contracts     Annuities    Total         Losses       Net*   
_____________________________________________________________________________________________________
<S>                                     <C>           <C>          <C>           <C>          <C>
Net investment income                   $  106.1      $ 116.9      $  223.0      $     -      $ 223.0
Net realized capital gains                  10.8         11.1          21.9         (21.9)          -
Interest earned on receivable    
  from continuing business                   5.3          7.8          13.1             -        13.1
Other income                                 7.2          6.0          13.2             -        13.2
                                        _____________________________________________________________
     Total revenue                         129.4        141.8         271.2         (21.9)      249.3
                                        _____________________________________________________________

Current and future benefits                102.4        107.3         209.7          37.2       246.9
Operating expenses                           1.7          0.7           2.4             -         2.4
                                        _____________________________________________________________
     Total benefits and expenses           104.1        108.0         212.1          37.2       249.3
                                        _____________________________________________________________

Results of discontinued products        $   25.3      $  33.8      $   59.1      $  (59.1)    $     -
_____________________________________________________________________________________________________
                                        _____________________________________________________________

                                                                                 Charged
                                                                                 (Credited) to
                                        Guaranteed    Single-                    Reserve for
                                        Investment    Premium                    Future
Three months ended March 31, 1995       Contracts     Annuities    Total         Losses       Net*   
_____________________________________________________________________________________________________
<S>                                     <C>           <C>          <C>           <C>          <C>
Net investment income                   $  132.3      $ 110.1      $  242.4      $     -      $ 242.4
Net realized capital gains (losses)        (18.5)         8.0         (10.5)        10.5            -
Interest earned on receivable
  from continuing business                   5.1          7.6          12.7            -         12.7
Other income                                 2.5          3.0           5.5            -          5.5
                                        _____________________________________________________________
     Total revenue                         121.4        128.7         250.1         10.5        260.6
                                        _____________________________________________________________

Current and future benefits                155.2        114.4         269.6        (10.2)       259.4
Operating expenses                           (.3)         1.5           1.2            -          1.2
                                        _____________________________________________________________
     Total benefits and expenses           154.9        115.9         270.8        (10.2)       260.6
                                        _____________________________________________________________

Results of discontinued products        $  (33.5)     $  12.8      $  (20.7)     $  20.7      $     -
_____________________________________________________________________________________________________
                                        _____________________________________________________________
<FN>
* Amounts are reflected in the 1996 and 1995 Consolidated Statements of Income, except for interest of
  $13.1 million and $12.7 million for the three months ended March 31, 1996 and 1995, respectively,
  earned on the receivable from continuing business which is eliminated in consolidation.
</TABLE>


<PAGE> 13

     AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(5)  Discontinued Products (Continued)

Assets and liabilities of discontinued products were as follows 
(in millions):

<TABLE>

<CAPTION>
                                                  March 31, 1996              
                                       _______________________________________

                                       Guaranteed      Single-
                                       Investment      Premium
                                       Contracts       Annuities     Total    
                                       _______________________________________

<S>                                    <C>             <C>           <C>

Debt securities available for sale     $ 2,012.2       $ 3,440.3     $ 5,452.5
Mortgage loans                           1,762.8         1,485.3       3,248.1
Real estate                                477.8           194.6         672.4
Short-term and other investments           183.3            86.7         270.0
                                       _______________________________________
   Total investments                     4,436.1         5,206.9       9,643.0
Current and deferred income taxes          153.3           132.6         285.9
Receivable from continuing business        435.0           501.4         936.4
                                       _______________________________________
   Total assets                        $ 5,024.4       $ 5,840.9     $10,865.3
______________________________________________________________________________
                                       _______________________________________
Future policy benefits                 $       -       $ 4,896.3     $ 4,896.3
Policyholders' funds left with
  the company                            4,646.8               -       4,646.8
Reserve for future losses on
  discontinued products                    246.7           771.2       1,017.9
Other                                      130.9           173.4         304.3
                                       _______________________________________
   Total liabilities                   $ 5,024.4       $ 5,840.9     $10,865.3
______________________________________________________________________________
                                       _______________________________________

</TABLE>


Net unrealized capital gains as of March 31, 1996 on available for 
sale debt securities are included above in other liabilities and 
are not reflected in consolidated shareholders' equity.  The 
reserve for anticipated future losses on GICs is included in 
policyholders' funds left with the company and the reserve for 
anticipated future losses on SPAs is included in future policy 
benefits on the Consolidated Balance Sheets.


<PAGE> 14

     AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(5)  Discontinued Products (Continued)

The activity in the reserve for anticipated future losses on 
discontinued products was as follows (pretax, in millions):

<TABLE>
<CAPTION>
                                      Three Months Ended March 31, 1996  
                                      ___________________________________
                                      Guaranteed    Single-
                                      Investment    Premium
                                      Contracts     Annuities   Total    
_________________________________________________________________________
<S>                                   <C>           <C>         <C>
Reserve at beginning of period        $   221.4     $   737.4   $   958.8
Results of discontinued products           25.3          33.8        59.1
                                      ___________________________________
Reserve at end of period              $   246.7     $   771.2   $ 1,017.9
_________________________________________________________________________
                                      ___________________________________
</TABLE>


At the time of discontinuance, a receivable from continuing 
business was established for each discontinued product equivalent 
to the net present value of the anticipated cash flow shortfalls.  
The receivables, on which interest is accrued at the discount 
rates used to calculate the loss on discontinuance, will be 
funded, net of taxes on the accrued interest, from invested assets 
supporting Large Case Pensions. The offsetting payable, on which 
interest is similarly accrued, was established in the continuing 
business.  The interest on such payable generally offsets the 
investment income on the assets available to fund the shortfall.  
At March 31, 1996, for GICs and SPAs, the receivables from 
continuing business, net of the related deferred taxes payable of 
$15.8 million and $23.2 million, respectively, on the accrued 
interest income were $419.2 million and $478.2 million, 
respectively.  As of March 31, 1996, no funding had taken place.  
These amounts are eliminated in consolidation and are therefore 
not reflected on the Consolidated Balance Sheets.

(6)  Investments

Net investment income includes amounts allocable to experience 
rated contractholders of $353.1 million and $360.8 million for the 
three months ended March 31, 1996 and 1995, respectively.  
Interest credited to contractholders is included in current and 
future benefits.

Net realized capital gains (losses) allocable to experience rated 
contractholders of $38.1 million and ($35.0) million for the three 
months ended March 31, 1996 and 1995, respectively, were deducted 
from net realized capital gains (losses) as reflected on the 
Consolidated Statements of Income, and an offsetting amount is 
reflected on the Consolidated Balance Sheets in policyholders' 
funds left with the company.

<PAGE> 15

     AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(6) Investments (Continued)

At March 31, 1996, the total recorded investment in mortgage loans 
that are considered to be impaired (which include problem loans, 
restructured loans and potential problem loans) under FAS No. 114 
and related specific reserves are presented in the table below.  
Included in such total recorded investment are impaired loans of 
$355 million for which no specific reserves are considered 
necessary.

<TABLE>

<CAPTION>

                                              Total
                                              Recorded          Specific
(Millions)                                    Investment        Reserves
________________________________________________________________________

<S>                                           <C>               <C>

Supporting discontinued products              $   642.5         $ 102.3
Supporting experience rated products              394.7            94.0
Supporting remaining products                     362.5            44.0
                                              _________________________
 Total Impaired Loans - 
    continuing operations                     $ 1,399.7         $ 240.3
_______________________________________________________________________
                                              _________________________
</TABLE>

The activity in the specific and general reserves as of March 31, 
1996 is summarized below:

<TABLE>

<CAPTION>
                                             Charged                                  Balance
                              Balance at     to net       Charged                     at
                              December 31,   realized     to other      Principal     March 31,
(Millions)                    1995           loss         accounts(1)   Write-offs    1996(2)  
_______________________________________________________________________________________________
<S>                           <C>            <C>          <C>           <C>           <C>

Supporting discontinued
 products                     $  287.5       $     -      $      -      $  (111.2)    $  176.3

Supporting experienced 
 rated products                  228.3             -            .6          (17.9)       211.0

Supporting remaining 
 products                         89.1           (.6)            -           (2.2)        86.3
                              ________________________________________________________________

  Total -    
  continuing operations       $  604.9        $  (.6)     $     .6      $  (131.3)    $  473.6
______________________________________________________________________________________________
                              ________________________________________________________________
<FN>


(1)  Reflects additions to reserves related to assets supporting experience rated products and 
     discontinued products which do not affect the company's results of operations.

(2)  Total reserves for continuing operations at March 31, 1996 include $240.3 million of specific
     reserves and $233.3 million of general reserves.

</TABLE>

The company accrues interest income on impaired loans to the 
extent it is deemed collectible and the loan continues to perform 
under its original or restructured contractual terms.  Interest 
income on problem loans is generally recognized on a cash basis.  
Cash payments on loans in the process of foreclosure are generally 
treated as a return of principal.

<PAGE> 16

     AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(6)  Investments (Continued)

Income earned (pretax) and received on the average recorded 
investment in impaired loans for the three months ended March 31, 
1996 was as follows:

<TABLE>
<CAPTION>
                                               Three Months Ended
                                                  March 31, 1996
                                          ______________________________
                                          Average
                                          Impaired    Income    Income
(Millions)                                Loans       Earned    Received
________________________________________________________________________
<S>                                       <C>         <C>       <C>

Supporting discontinued products          $   695.4   $  15.0   $  15.5
Supporting experience rated products          501.3       9.5       9.8
Supporting remaining products                 218.5       5.5       4.8
                                          _____________________________
  Total continuing operations             $ 1,415.2   $  30.0   $  30.1
_______________________________________________________________________
                                          _____________________________
</TABLE>

As of January 1, 1996, the company adopted FAS No. 121, Accounting 
for the Impairment of Long-Lived Assets and Long-Lived Assets to 
Be Disposed Of.  This statement requires long-lived assets to be 
held and used to be written down to fair value when they are 
considered impaired.  Long-lived assets to be disposed of (e.g., 
real estate held for sale) are to be carried at the lower of cost 
or fair value less estimated selling costs.  In addition, this 
statement does not allow long-lived assets to be disposed of to be 
depreciated.  As a result of the adoption of FAS No. 121 on 
January 1, 1996, valuation reserves were increased by $52.9 
million in connection with the reversal of previously recorded 
accumulated depreciation related to properties held for sale.  The 
adoption of FAS No. 121 did not have a material effect on results 
of operations.

(7)  Debt

The company has credit facilities aggregating $1 billion with a 
group of worldwide banks.  One $500 million facility terminates in 
July 1996.  Another $500 million facility terminates in July 1999.  
Various interest rate options are available under each facility 
and any borrowings mature on the expiration date of the applicable 
credit commitment.  The company pays facility fees ranging from 
 .08% to .375% per annum under the short-term credit agreement and 
from .1% to .5% per annum under the medium-term credit agreement, 
depending upon the company's long-term senior unsecured debt 
rating.  The commitments require the company to maintain 
shareholders' equity, excluding net unrealized capital gains and 
losses, of at least $5.0 billion.  These facilities also support 
the company's commercial paper borrowing program.  (Please refer 
to Note 2 for discussion of additional debt expected to be 
incurred in connection with the merger with U.S. Healthcare.)

Pursuant to shelf registration statements declared effective by 
the Securities and Exchange Commission ("SEC"), the company may 
offer and sell up to $550 million of various types of securities.


<PAGE> 17

     AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(7) Debt (Continued)

A subsidiary of the company may offer and sell up to an additional 
$225 million of preferred securities under a shelf registration 
statement declared effective by the SEC.

(8)  Off-Balance-Sheet Financial Instruments
     (including Derivative Financial Instruments)

The company engages in hedging activities to manage foreign 
exchange and interest rate risk.  Such hedging activities have 
principally consisted of using off-balance-sheet instruments 
including foreign exchange forward contracts, futures and forward 
contracts, and interest rate swap agreements.  (Please see General 
Account Investments - Use of Derivatives and Other Investments on 
page 44 of the Management's Discussion and Analysis of Financial 
Condition and Results of Operations and Note 16 of the company's 
1995 Annual Report to Shareholders for a description of the 
company's hedging activities).  The notional amounts, carrying 
values and estimated fair values of the company's off-balance-
sheet financial instruments from continuing operations are as 
follows (in millions):

<TABLE>

<CAPTION>
                                                         Carrying
                                                         Value
                                             Notional    Asset        Fair
March 31, 1996                               Amount      (Liability)  Value   
______________________________________________________________________________
<S>                                          <C>         <C>          <C>
Foreign exchange forward contracts - sell:
  Related to net investments in foreign
    affiliates                               $ 174.3     $  (1.2)     $  (2.8)
  Related to investments in nondollar
    denominated assets                          90.7        (0.2)           -
Foreign exchange forward contracts - buy:
  Related to net investments in foreign
    affiliates                                   2.7         0.1           0.3
  Related to investments in nondollar
    denominated assets                          31.7         0.2           0.2
Interest rate swaps:
  Unrecognized gains                            43.0           -           6.7
Futures contracts to purchase investments       51.4        (1.4)         (1.4)
Forward swap agreement                          60.0           -           0.3

</TABLE>

At March 31, 1996, continuing operations had commitments to 
purchase investments for $142.1 million, the fair market value of 
which was $142.2 million.

(9)   Supplemental Cash Flow Information

Significant noncash investing and financing activities of 
continuing operations include acquisition of real estate through 
foreclosures (including in-substance foreclosures) of mortgage 
loans amounting to $36.5 million and $9.7 million for the three 
months ended March 31, 1996 and 1995, respectively.

<PAGE> 18

     AETNA LIFE AND CASUALTY COMPANY AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)


(10)  Earnings Per Share

Earnings per share are computed using net income divided by the 
weighted average number of common shares outstanding (including 
common share equivalents). There is no difference between primary 
and fully diluted earnings per share.

(11)  Litigation

The company is continuously involved in numerous lawsuits arising, 
for the most part, in the ordinary course of its business 
operations as an insurer. While the ultimate outcome of such 
litigation cannot be determined at this time, such litigation, net 
of reserves established therefor, is not expected to result in 
judgments for amounts material to the financial condition of the 
company, although it may adversely affect results of operations in 
future periods.

<PAGE> 19

           Independent Auditors' Review Report

The Board of Directors
Aetna Life and Casualty Company:

We have reviewed the accompanying condensed consolidated balance 
sheet of Aetna Life and Casualty Company and Subsidiaries as of 
March 31, 1996, and the related condensed consolidated statements 
of income for the three-month periods ended March 31, 1996 and 
1995, and the related condensed consolidated statements of 
shareholders' equity and cash flows for the three-month periods 
ended March 31, 1996 and 1995.  These condensed consolidated 
financial statements are the responsibility of the company's 
management.

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

Based on our review, we are not aware of any material 
modifications that should be made to the accompanying condensed 
consolidated financial statements for them to be in conformity 
with generally accepted accounting principles.

We have previously audited, in accordance with generally accepted 
auditing standards, the consolidated balance sheet of Aetna Life 
and Casualty Company and Subsidiaries as of December 31, 1995, and 
the related consolidated statements of income, shareholders' 
equity, and cash flows for the year then ended (not presented 
herein); and in our report dated February 6, 1996, we expressed an 
unqualified opinion on those consolidated financial statements.  
In our opinion, the information set forth in the accompanying 
condensed consolidated balance sheet as of December 31, 1995, is 
fairly presented, in all material respects, in relation to the 
consolidated balance sheet from which it has been derived.




/s/ KPMG PEAT MARWICK LLP
Hartford, Connecticut
April 25, 1996


<PAGE> 20

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations

Consolidated Results of Operations
__________________________________

<TABLE>
<CAPTION>

Operating Summary
(Millions, except per share data)          Three Months Ended March 31    
                                       ___________________________________
                                       1996         1995          % Change
                                       ____         ____          ________
<S>                                    <C>          <C>           <C>

Premiums.............................  $ 1,843.9   $  1,882.1      (2.0)%
Net investment income................      886.3        870.0       1.9
Fees and other income................      518.2        453.4      14.3
Net realized capital gains (losses)..       62.0        (13.2)        -
                                       _________   __________          
    Total revenue....................    3,310.4      3,192.3       3.7

Current and future benefits..........    2,236.9      2,275.7      (1.7)
Operating expenses...................      790.2        741.2       6.6
Amortization of deferred policy
 acquisition costs...................       37.0         32.0      15.6
                                       _________   __________          
    Total benefits and expenses......    3,064.1      3,048.9        .5
                                       _________   __________          

Income from continuing operations
 before income taxes.................      246.3        143.4      71.8
Income taxes.........................       80.8         51.0      58.4
                                       _________   __________          

Income from continuing operations....      165.5         92.4      79.1

Income from Discontinued Operations,
 net of tax..........................      182.2         68.4     166.4
                                       _________   __________          

    Net income.......................  $   347.7   $    160.8     116.2
                                       _________   __________          
                                       _________   __________          

Net realized capital gains (losses)
 from continuing operations, net of 
 tax (included above)................  $    41.4   $    (10.6)        -
                                       _________   __________          
                                       _________   __________          

Income from continuing operations
 per common share....................  $    1.43   $      .82      74.4

Income from Discontinued Operations,
 net of tax..........................       1.57          .60     161.7
                                       _________   __________          

Net income per common share..........  $    3.00   $     1.42     111.3
                                       _________   __________          
                                       _________   __________          
</TABLE>

Overview
________

Agreement to Merge with U.S. Healthcare

The company and U.S. Healthcare, Inc. ("U.S. Healthcare") entered 
into an agreement, dated as of March 30, 1996, pursuant to which 
they agreed to merge in a transaction, valued at that time, at 
approximately $8.9 billion.  The merger agreement, which has been 
approved by the board of directors of each company, calls for the 
formation of a new holding company, Aetna Inc.  U.S. Healthcare 
shareholders will receive $34.20 in cash, 0.2246 shares of Aetna 
Inc. common stock and 0.0749 shares of Aetna Inc. mandatorily 
convertible preferred stock for each share of U.S. Healthcare 
common stock and each share of U.S. Healthcare Class B Stock 
outstanding.  Each outstanding share of the company's common stock 
will become a share of common stock of Aetna Inc.  Immediately 
after the transaction, the company and U.S. Healthcare will each 
be wholly-owned subsidiaries of Aetna Inc., and Aetna Inc. will be 
owned approximately 78% by the company's shareholders and 
approximately 22% by U.S. Healthcare shareholders (approximately 
72% and approximately 28%, respectively, on a fully diluted 
basis).

<PAGE> 21

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Overview (Continued)
____________________

In addition, subsidiaries of the company and Leonard Abramson (the 
"Shareholder") entered into a voting agreement, dated as of March 
30, 1996, pursuant to which the Shareholder agreed, among other 
things, to vote all of his Class B Stock of U.S. Healthcare, 
representing approximately 83.7% of the aggregate voting power of 
the capital stock of U.S. Healthcare, in favor of the merger.

The company expects to finance the transaction with a combination 
of $5.3 billion in cash ($3.9 billion from the net proceeds 
received from the sale of its property-casualty operations (see 
below) and $1.4 billion of additional bank debt, which may 
initially be financed with commercial paper) and the issuance of 
$2.7 billion of new Aetna Inc. common stock and $0.9 billion of 
Aetna Inc. mandatorily convertible preferred stock.  The agreement 
is subject to approval by the shareholders of both companies, 
expiration of the waiting period under the Hart-Scott-Rodino 
Antitrust Improvements Act of 1976, receipt of required insurance, 
healthcare and other regulatory approvals, and other customary 
conditions.  It is expected to close in the third quarter of 1996.

See "Overview - Income from Continuing Operations" on page 22 and 
"Liquidity and Capital Resources" on page 45 for a discussion of 
certain factors that are expected to impact the company after the 
consummation of the merger with U.S. Healthcare.

For financial and business information regarding U.S. Healthcare, 
see its Form 10-K and other reports filed with the Securities and 
Exchange Commission ("SEC").

Sale of Property-Casualty Operations

On April 2, 1996, the company completed the sale of its property-
casualty operations to an affiliate of The Travelers Insurance 
Group Inc. (Travelers) for approximately $4.1 billion in cash.  
The sale resulted in a gain of approximately $265 million (after 
tax) which will be reflected in the second quarter of 1996.

In conjunction with the sale, Travelers subleased the space 
currently occupied by the company in the CityPlace office facility 
in Hartford for eight years at current market rates.  The company 
will reflect a charge of approximately $190 million (after tax) in 
the second quarter of 1996 representing the present value of the 
difference between rent required to be paid by the company under 
the lease and future rentals expected to be received by the 
company.  The company also expects to reflect additional severance 
and facilities charges in the second quarter of 1996 of 
approximately $45 million (after tax) due to actions expected to 
be taken to reduce the level of corporate expenses and other costs 
previously absorbed by the property-casualty operations.

See "Discontinued Operations - Property-Casualty Operations" on 
page 35.

<PAGE> 22

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Overview (Continued)
____________________

Strategic Outlook

The agreement to merge with U.S. Healthcare, which follows the 
recently completed sale of the company's property-casualty 
operations, represents the second step of the company's previously 
announced strategic decision to focus its resources on pursuing 
growth opportunities in its health care business, and evaluating 
opportunities for growth and development of its financial services 
and international operations.

The company currently anticipates recording severance charges 
related to Aetna Health Plans in the second quarter.  (See "Aetna 
Health Plans" on page 25.)  Further, the company continues to 
conduct strategic and financial reviews of all of its continuing 
operations in order to make such operations more competitive.  
Such reviews may result in restructuring actions in 1996 which 
would be in addition to the severance and facilities charges 
anticipated in connection with the sale of the company's property-
casualty operations, as well as the Aetna Health Plans' severance 
charge, although the amount of any such charges cannot be 
estimated at this time.

Income from Continuing Operations

The company reported income from continuing operations of 
$166 million for the three months ended March 31, 1996 compared 
with $92 million for the same period a year ago.  Excluding net 
realized capital gains and losses, results for the three months 
ended March 31, 1996 increased $21 million from the prior year 
reflecting improved earnings in all of the company's continuing 
businesses.

Earnings from continuing operations for the balance of 1996 will 
be impacted by the earnings from the investment of the net 
proceeds received from the property-casualty sale until the U.S. 
Healthcare merger closes.  It will then be affected, among other 
things, by the earnings of U.S. Healthcare, the costs of financing 
the merger and the amortization of approximately $8 billion of 
intangible assets (primarily goodwill) expected to be created as a 
result of the merger.  The company also anticipates that the 
merger will yield increased operating income for its new combined 
health businesses resulting from expense savings and increased 
revenues (the "estimated synergies").  The annual increase in 
operating income is expected to be approximately $300 million 
(after tax) per year, and is expected to be achieved within 18 
months of the closing of the transaction.  The estimated synergies 
set forth above are forward-looking information.  For discussion 
of factors regarding such forward-looking information, see 
"Forward-Looking Information" on page 47.



<PAGE> 23

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Overview (Continued)
____________________

Net Realized Capital Gains and Losses

Net realized after-tax capital gains and losses from continuing 
operations included in net income, allocable to experience rated 
pension contractholders, and supporting discontinued products were 
as follows (in millions):

<TABLE>
<CAPTION>
                                           Three Months Ended March 31
                                           ___________________________
                                                 1996         1995
                                                 ____         ____

<S>                                              <C>          <C>

Net realized capital gains (losses)
  from sales.................................    $  41.0     $  (8.6)

Net realized capital gains (losses) from 
  changes in reserves for mortgage loans 
  and real estate............................         .4        (2.0)
                                                 _______     _______ 

Net realized capital gains (losses) from
  continuing operations......................    $  41.4     $ (10.6)
                                                 _______     _______ 
                                                 _______     _______ 

Net realized capital gains (losses) allocable
  to experience rated pension contractholders
  (excluded above)...........................    $  24.8     $ (22.8)
                                                 _______     _______ 
                                                 _______     _______ 

Net realized capital gains (losses) on 
  assets supporting discontinued products
  (excluded above)...........................    $  14.2     $  (6.8)
                                                 _______     _______ 
                                                 _______     _______ 

</TABLE>

Net realized capital gains from sales in the first quarter of 1996 
include a $15 million gain from the sale of an HMO subsidiary.

For information about net realized after-tax capital gains on 
assets related to Discontinued Operations, see "Discontinued 
Operations - Property-Casualty Operations" on page 35.

<PAGE> 24

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Aetna Health Plans
__________________

<TABLE>
<CAPTION>
Operating Summary
(Millions)                                 Three Months Ended March 31   
                                       __________________________________
                                       1996         1995         % Change
                                       ____         ____         ________

<S>                                    <C>          <C>          <C>

Premiums............................   $ 1,552.1    $ 1,494.7      3.8%
Net investment income...............        93.8         84.7     10.7
Fees and other income...............       355.6        307.5     15.6
Net realized capital gains (losses).        31.2         (4.2)       -
                                       _________    _________         
   Total revenue....................     2,032.7      1,882.7      8.0

Current and future benefits.........     1,344.9      1,273.3      5.6
Operating expenses..................       529.9        485.0      9.3
Amortization of deferred policy
 acquisition costs..................         2.8          6.8    (58.8)
                                       _________    _________          
   Total benefits and expenses......     1,877.6      1,765.1      6.4
                                       _________    _________         

Income before income taxes..........       155.1        117.6     31.9
Income taxes........................        53.7         44.0     22.0
                                       _________    _________         

Net income..........................   $   101.4    $    73.6     37.8
                                       _________    _________         
                                       _________    _________         
Net realized capital gains (losses),
 net of tax (included above)........   $    21.5    $    (2.8)       -
                                       _________    _________         
                                       _________    _________         
</TABLE>

Aetna Health Plans' net income for the three months ended March 
31, 1996 increased by $28 million compared with the same period a 
year ago.  Excluding net realized capital gains and losses, 
results for the three months ended March 31, 1996 increased 
$4 million from the prior year.

Results for the first quarter of 1996 reflect increased earnings 
in the Group Insurance business resulting from growth in 
membership.  Earnings in the first quarter of 1996 related to the 
Health and Specialty Health businesses were, in the aggregate, 
level compared to the same period a year ago.  HMO earnings were 
$10 million and $11 million for the quarters ended March 31, 1996 
and 1995, respectively, reflecting an increase in the medical loss 
ratio which was substantially offset by increased membership.  The 
HMO medical loss ratios were 87.0% and 84.5% for the three months 
ended March 31, 1996 and 1995, respectively.  The increase in the 
loss ratio is primarily attributable to lower premiums per member 
due to competitive pricing.

Revenue, excluding net realized capital gains and losses, for the 
Health and Specialty Health businesses increased approximately $82 
million or 5% in the first quarter of 1996 compared with the same 
period in 1995, primarily due to the shift in membership to 
managed care products.  Membership in managed care products for 
the quarter ended March 31, 1996 increased .7 million members from 
the same period a year ago.  Revenue, excluding net realized 
capital gains and losses, for the Group Insurance business 
increased approximately $32 million or 9% in the first quarter of 
1996 compared with the same period in 1995 resulting from 
increased membership.



<PAGE> 25

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Aetna Health Plans (Continued)
______________________________

Operating expenses in the Health business increased in the first 
quarter of 1996 compared with the same period in 1995 due to the 
continued migration of members from the indemnity to the more 
resource-intensive POS product.  AHP is continuing to refine its 
systems and processes in order to slow the growth of the 
administrative costs associated with its managed care products as 
the migration to those products from indemnity products continues.

Severance charges of approximately $20 million (after tax) are 
currently anticipated for the second quarter related to actions 
expected to be taken to reduce costs.  Such actions are primarily 
related to reducing information technology costs.

Net realized capital gains in the first quarter of 1996 were 
primarily attributable to the sale of an HMO subsidiary.  The 
earnings of this subsidiary were not material to AHP's results.

The number of Health members participating in risk versus nonrisk 
plans was as follows:

<TABLE>
<CAPTION>

                                       March 31, 1996                    March 31, 1995
                                 __________________________        ___________________________
(Millions)                       Risk     Nonrisk     Total        Risk     Nonrisk     Total
___________________________________________________________        __________________________
<S>                              <C>      <C>          <C>         <C>      <C>          <C>

Health
  HMO                             1.3        .3         1.6         1.2        .3         1.5
  POS                              .5       2.1         2.6          .3       1.7         2.0
                                 __________________________         _________________________
   Total Gated Managed Care       1.8       2.4         4.2         1.5       2.0         3.5
  PPO                             1.3       2.8         4.1         1.3       2.8         4.1
                                 __________________________        __________________________
   Total Managed Care             3.1       5.2         8.3         2.8       4.8         7.6
  Traditional Indemnity            .6       3.0         3.6         1.0       3.4         4.4
                                 __________________________        __________________________
Total Health                      3.7       8.2        11.9         3.8       8.2        12.0
                                 __________________________        __________________________
                                 __________________________        __________________________
</TABLE>

Membership attributable to a risk contract with the Civilian 
Health and Military Program of the Uniformed Services ("Champus") 
of .7 million members at March 31, 1996 and 1995 is included in 
total managed care membership.  Champus has awarded renewal of the 
contract to another provider effective April 1, 1996.  The company 
expects that there will not be a material adverse impact to 
earnings of the segment as a result of the loss of this contract.

The number of members covered by Specialty Health products was as 
follows:

<TABLE>
<CAPTION>

                                       March 31   
                                 __________________
(Millions)                       1996(1)    1995(1)
___________________________________________________
<S>                              <C>        <C>    

Behavioral Health (2)             14.8       15.1
                                  ____       ____
                                  ____       ____

Dental (2)                         7.9        8.4
                                  ____       ____
                                  ____       ____

Managed Pharmacy                   4.6        3.8
                                  ____       ____
                                  ____       ____
<FN>

(1) Many Specialty Health members participate in more than one type of AHP 
    coverage and are therefore counted in each.
(2) The decline in membership was primarily due to increased competition 
    related to the pricing of such products.  Such decline was not material
    to AHP's earnings.
</TABLE>

<PAGE> 26

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Aetna Health Plans (Continued)
______________________________

The number of members covered by Group Insurance products was as 
follows:

<TABLE>
<CAPTION>

                                       March 31   
                                 __________________
(Millions)                       1996(1)    1995(1)
___________________________________________________
<S>                              <C>        <C>    

Group Life (2)                     8.4        7.9
                                  ____       ____
                                  ____       ____

Disability                         2.4        2.2
                                  ____       ____
                                  ____       ____

Long-Term Care                      .1         .1
                                  ____       ____
                                  ____       ____

<FN>

(1) Many Group Insurance members participate in more than one type of AHP 
    coverage and are therefore counted in each.
(2) Group life includes members with accident coverages.

</TABLE>

Please see "Overview" on page 20 for a discussion related to the 
merger of the company and U.S. Healthcare.

<PAGE> 27

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Aetna Retirement Services (formerly named Aetna Life Insurance &   
_________________________                                          
  Annuity)

<TABLE>
<CAPTION>
Operating Summary
(Millions)                                 Three Months Ended March 31    
                                       ___________________________________
                                       1996         1995          % Change
                                       ____         ____          ________

<S>                                    <C>          <C>           <C>

Premiums............................   $    26.0    $    42.4      (38.7)%
Net investment income...............       267.3        245.5        8.9
Fees and other income...............       103.3         84.0       23.0
Net realized capital gains..........        15.7          3.0          -
                                       _________    _________           
   Total revenue....................       412.3        374.9       10.0

Current and future benefits.........       232.1        224.5        3.4
Operating expenses..................        82.8         74.8       10.7
Amortization of deferred policy
 acquisition costs..................        17.3         11.4       51.8
                                       _________    _________           
   Total benefits and expenses......       332.2        310.7        6.9
                                       _________    _________           

Income before income taxes..........        80.1         64.2       24.8
Income taxes........................        23.6         20.7       14.0
                                       _________    _________           

Net income..........................   $    56.5    $    43.5       29.9
                                       _________    _________           
                                       _________    _________           
Net realized capital gains, net
 of tax (included above)............   $    10.2    $     1.9         -
                                       _________    _________          
                                       _________    _________          

Deposits not included in premiums
 above .............................   $ 1,091.9    $   784.4       39.2
                                       _________    _________           
                                       _________    _________           

Assets under management (1)(2)......   $26,430.0    $21,214.4       24.6
                                       _________    _________           
                                       _________    _________           
<FN>
(1) Excludes net unrealized capital gains (losses) of approximately $302 million 
    and $(70) million at March 31, 1996 and 1995, respectively.
(2) Includes $3.2 billion and $1.1 billion at March 31, 1996 and 1995, respectively,
    related to assets held and managed by unaffiliated mutual funds.
</TABLE>

Aetna Retirement Services' net income for the three months ended 
March 31, 1996 increased $13 million from the same period a year 
ago.  Excluding net realized capital gains, results for the three 
months ended March 31, 1996 increased $5 million from the same 
period a year ago.

Results in the first quarter of 1996 benefited from increased fees 
assessed against policyholders related to the growth in assets 
under management, partially offset by an increase in operating 
expenses.  The increase in operating expenses primarily reflects 
continued business growth and investment in nontraditional 
distribution channels (e.g., banks and broker/dealers).

Assets under management at March 31, 1996 were 25% higher than a 
year earlier primarily as a result of continued business growth 
and overall improvement in the stock market.


<PAGE> 28

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Aetna Retirement Services
_________________________

Premiums decreased 39% in the first quarter of 1996 compared to 
the first quarter of 1995 primarily because Aetna Retirement 
Services ceased writing structured settlements of certain 
liabilities in the fourth quarter of 1995.  Such decrease did not 
and is not expected to have a material effect on results of the 
segment.

Current and future benefits increased 3% in the first quarter of 
1996 compared to the same period a year ago reflecting continued 
business growth, substantially offset by a decrease in current and 
future benefits related to the cessation of the structured 
settlement product discussed above.


<PAGE> 29

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

International
_____________

<TABLE>
<CAPTION>

Operating Summary
(Millions)                                 Three Months Ended March 31      
                                       _____________________________________
                                       1996         1995          % Change
                                       ____         ____          ________

<S>                                    <C>          <C>           <C>

Premiums............................   $   239.6    $   220.6       8.6%
Net investment income...............        83.0         68.3      21.5
Fees and other income...............        29.4         26.3      11.8
Net realized capital gains (losses).         1.1         (3.8)        -
                                       _________    _________          
   Total revenue....................       353.1        311.4      13.4

Current and future benefits.........       213.2        196.8       8.3
Operating expenses..................        86.3         83.3       3.6
Amortization of deferred policy
 acquisition costs..................        16.9         13.8      22.5
                                       _________    _________          
   Total benefits and expenses......       316.4        293.9       7.7
                                       _________    _________          

Income before income taxes..........        36.7         17.5     109.7
Income taxes .......................        12.0          3.4         -
                                       _________    _________          

Net income..........................   $    24.7    $    14.1      75.2
                                       _________    _________          
                                       _________    _________          
Net realized capital gains (losses),
 net of tax (included above)........   $      .6    $    (2.8)        -
                                       _________    _________          
                                       _________    _________          

</TABLE>

International's net income for the three months ended March 31, 
1996 increased by $11 million compared with the same period a year 
ago.  Excluding net realized capital gains and losses, results for 
the three months ended March 31, 1996 increased $7 million from 
the same period a year ago.  The improvement in the first quarter 
reflected increased earnings in the Pacific Rim and Latin America, 
primarily reflecting continued revenue growth, as well as lower 
growth in operating expenses due to tighter controls over such 
costs.  Improved earnings in Latin America also reflect higher net 
investment income because of the sustained high interest rate 
environment in Mexico.


<PAGE> 30

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Large Case Pensions
___________________

<TABLE>

<CAPTION>

Operating Summary
(Millions)                                 Three Months Ended March 31    
                                       ___________________________________
                                       1996         1995          % Change
                                       ____         ____          ________

<S>                                    <C>          <C>           <C>

Premiums...........................    $    26.2    $   124.4     (78.9)%
Net investment income..............        442.9        468.2      (5.4)
Fees and other income..............         29.3         35.1     (16.5)
Net realized capital gains (losses)         10.2         (7.7)        -
                                       _________    _________          
   Total revenue...................        508.6        620.0     (18.0)

Current and future benefits........        446.7        581.1     (23.1)
Operating expenses.................         20.3         20.6      (1.5)
                                       _________    _________           
   Total benefits and expenses.....        467.0        601.7     (22.4)
                                       _________    _________           

Income before income taxes.........         41.6         18.3     127.3
Income taxes.......................         14.8          7.0     111.4
                                       _________    _________          

Net income.........................    $    26.8    $    11.3     137.2
                                       _________    _________          
                                       _________    _________          

Net realized capital gains (losses),
  net of tax (included above)......    $     6.6    $    (5.0)        -
                                       _________    _________          
                                       _________    _________          

Deposits not included in premiums
  above ...........................    $   394.4    $   422.8      (6.7)
                                       _________    _________           
                                       _________    _________           

Assets under management (1)(2).....    $37,300.0    $46,291.0     (19.4)
                                       _________    _________           
                                       _________    _________           

<FN>
(1) Excludes net unrealized capital gains (losses) of approximately $266 million
    and $(165) million at March 31, 1996 and 1995, respectively.
(2) Includes assets under management related to discontinued products.

</TABLE>

Large Case Pensions' net income for the three months ended 
March 31, 1996 increased by $16 million compared with the same 
period a year ago.  Excluding net realized capital gains and 
losses, results for the three months ended March 31, 1996 
increased $4 million from the prior year primarily reflecting an 
increase in net interest margins.

1995 premiums reflected additional premiums from existing 
contractholders which did not have a material effect on results.

Assets under management at March 31, 1996 were 19% lower than a 
year earlier primarily as a result of the sale of Insurance 
Company Investment Management ("ICIM"), a specialized asset 
manager conducting business through the company's Aeltus 
Investment Management subsidiary ("Aeltus"), in the first quarter 
of 1996.  ICIM was not a significant contributor to Large Case 
Pensions' earnings in 1995 or in the first quarter of 1996.


<PAGE> 31

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Large Case Pensions (Continued)
_______________________________

Experience rated contractholder and participant withdrawals and 
transfers were as follows (excluding contractholder transfers to 
other company products) (in millions):

<TABLE>
<CAPTION>
                                     Three Months Ended March 31 
                                     ____________________________
                                           1996          1995
                                           ____          ____
<S>                                        <C>           <C>
Scheduled contract maturities
 and benefit payments (1)..........        $  318.1      $  270.3
                                           ________      ________
                                           ________      ________

Contractholder withdrawals other
 than scheduled contract maturities
 and benefit payments..............        $  315.2 (2)  $   97.6
                                           ________      ________
                                           ________      ________

Participant withdrawals............        $   56.4      $   54.5
                                           ________      ________
                                           ________      ________
<FN>
(1) Includes payments made upon contract maturity and other amounts
    distributed in accordance with contract schedules.
(2) Primarily relates to an unscheduled withdrawal by one contractholder.
</TABLE>

The company is exploring sale or other alternatives for certain 
portions of its large case pension investment management and advisory 
business conducted through its subsidiary, Aeltus.  Such actions have 
included the signing, in 1996, of a letter of intent to sell Aetna 
Realty Investors ("ARI") to TA Associates.  The sale is expected to 
close in the second quarter of 1996.  ARI contributed $2 million to 
Large Case Pensions' net income for the three months ended March 31, 
1996 and 1995.

Discontinued Products

Results of discontinued fully guaranteed large case pension products 
(guaranteed investment contracts ("GICs") and single-premium 
annuities ("SPAs")) for the three months ended March 31, 1996 and 
1995 were credited/charged to the reserve for anticipated future 
losses and did not affect the company's results of operations.  
Future net losses (including capital losses) for each product will be 
charged to the respective reserve at the time such losses are 
realized.  Management believes the reserve for anticipated losses at 
March 31, 1996 is adequate to provide for future losses associated 
with the guaranteed product liabilities.  To the extent that actual 
future losses are greater than anticipated future net losses, the 
company's results of operations would be adversely affected.  
Conversely, if actual future losses are less than anticipated future 
losses, the company's results of operations would be favorably 
affected.  (Please refer to the company's 1995 Annual Report to 
Shareholders for a more complete discussion of the reserve for 
anticipated future losses on discontinued products.)


<PAGE> 32

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Large Case Pensions (Continued)
_______________________________

At the time of discontinuance, a receivable from continuing 
business was established for each discontinued product equivalent 
to the net present value of the anticipated cash flow shortfalls.  
The receivables, on which interest is accrued at the discount 
rates used to calculate the loss on discontinuance, will be 
funded, net of taxes on the accrued interest, from invested assets 
supporting Large Case Pensions.  The offsetting payable, on which 
interest is similarly accrued, was established in the continuing 
business.  The interest on such payable generally offsets the 
investment income on the assets available to fund the shortfall.  
At March 31, 1996, for GICs and SPAs, the receivables from 
continuing business, net of the related deferred taxes payable of 
$16 million and $23 million, respectively, on the accrued interest 
income, were $419 million and $478 million, respectively.  As of 
March 31, 1996, no funding had taken place.

Results of discontinued products were as follows (in millions):

<TABLE>
<CAPTION>
                                               Three Months Ended March 31   
                                             ________________________________
                                                           1996              
                                             ________________________________
                                             GICs        SPAs        Total
                                             ____        ____        _____
<S>                                          <C>         <C>         <C>
Interest margin (a)......................    $    2.4    $    6.2    $    8.6
Net realized capital gains...............         7.0         7.2        14.2
Interest earned on receivable from
  continuing business....................         3.4         5.1         8.5
Other, net...............................         2.7         4.1         6.8
                                             ________    ________    ________

Results of discontinued products,
  after-tax..............................    $   15.5    $   22.6    $   38.1
                                             ________    ________    ________
                                             ________    ________    ________

Results of discontinued products,
 pretax..................................    $   25.3    $   33.8    $   59.1
                                             ________    ________    ________
                                             ________    ________    ________

Net realized capital gains from sales
  of bonds, after tax, included above....    $    2.1    $    4.4    $    6.5
                                             ________    ________    ________
                                             ________    ________    ________
</TABLE>

<TABLE>
<CAPTION>
                                               Three Months Ended March 31   
                                             ________________________________
                                                           1995              
                                             ________________________________
                                             GICs        SPAs        Total
                                             ____        ____        _____
<S>                                          <C>         <C>         <C>
Negative interest margin (a).............    $  (14.9)   $   (2.8)   $  (17.7)
Net realized capital gains (losses)......       (12.0)        5.2        (6.8)
Interest earned on receivable from
  continuing business....................         3.3         5.0         8.3
Other, net...............................         1.1         1.6         2.7
                                             ________    ________    ________

Results of discontinued products,
  after-tax..............................    $  (22.5)   $    9.0    $  (13.5)
                                             ________    ________    ________ 
                                             ________    ________    ________ 

Results of discontinued products, pretax.    $  (33.5)   $   12.8    $  (20.7)
                                             ________    ________    ________ 
                                             ________    ________    ________ 

Net realized capital gains (losses)
  from sales of bonds, after tax,
  included above.........................    $   (5.7)   $    9.4    $    3.7 
                                             ________    ________    _________
                                             ________    ________    _________
<FN>

(a) Represents the amount by which interest credited to holders of fully
    guaranteed large case pension contracts (exceeds) or is less than interest 
    earned on invested assets supporting such contracts.

</TABLE>


<PAGE> 33

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Large Case Pensions (Continued)
_______________________________

The results of the discontinued products in the first quarter of 
1996 were favorably affected by nonrecurring items including 
rental income received on a foreclosed property of $6 million 
(after tax) related to GICs and $3 million (after tax) related to 
SPAs.  Such rental income had previously not been recognized due 
to uncertainties associated with its ultimate collection.  
Additionally, the adoption of FAS No. 121, favorably impacted the 
results of GICs by $4 million (after tax) and SPAs by $2 million 
(after tax).

Despite the improvement in earnings in the first quarter of 1996, 
management expects that negative interest margins related to GICs 
will recur and negative interest margins related to SPAs will 
emerge over the next several years as the average yield from the 
investment portfolio declines and will continue as the liabilities 
are paid.

The activity in the reserve for anticipated future losses on 
discontinued products was as follows (pretax, in millions):

<TABLE>
<CAPTION>
                                   Three Months Ended March 31, 1996
                                   _________________________________
                                   GICs        SPAs        Total
                                   ____        ____        _____
<S>                                <C>         <C>         <C>
Reserve at December 31, 1995.....  $  221.4    $  737.4    $  958.8
Results of discontinued products.      25.3        33.8        59.1
                                   ________    ________    ________
Reserve at March 31, 1996........  $  246.7    $  771.2    $1,017.9
                                   ________    ________    ________
                                   ________    ________    ________
</TABLE>

Distributions on GICs and SPAs were as follows (in millions):

<TABLE>
<CAPTION>
                                             Three Months Ended March 31     
                                         ____________________________________
                                                        1996                 
                                         ____________________________________
                                         GICs          SPAs          Total
                                         ____          ____          _____
<S>                                      <C>           <C>           <C>
Scheduled contract maturities,
 GIC settlements and benefit
 payments (1)......................      $  500.2      $  133.0      $  633.2
                                         ________      ________      ________
                                         ________      ________      ________

Participant directed withdrawals...      $   15.5      $      -      $   15.5
                                         ________      ________      ________
                                         ________      ________      ________



                                             Three Months Ended March 31     
                                         ____________________________________
                                                        1995                 
                                         ____________________________________
                                         GICs          SPAs          Total
                                         ____          ____          _____
<S>                                      <C>           <C>           <C>
Scheduled contract maturities,
 GIC settlements and benefit 
 payments (1)......................      $  644.8      $  133.7      $  778.5
                                         ________      ________      ________
                                         ________      ________      ________

Participant directed withdrawals...      $   27.1      $      -      $   27.1
                                         ________      ________      ________
                                         ________      ________      ________
<FN>

(1) Includes payments made upon contract maturity, early contractual settlements of 
    GIC liabilities, and other amounts distributed in accordance with contract schedules.
</TABLE>

Cash required to meet the above payments was provided by earnings 
on, sales of, and scheduled payments on, invested assets.

(Please see "General Account Investments" on page 36 for a 
discussion of investments supporting discontinued products.)

<PAGE> 34

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Corporate
_________

<TABLE>
<CAPTION>

Operating Summary
(Millions, after-tax)                      Three Months Ended March 31    
                                       ___________________________________
                                       1996         1995          % Change
                                       ____         ____          ________

<S>                                    <C>          <C>           <C>

Interest expense....................   $    19.4    $    18.1       7.2%
Other expense, net..................        24.5         32.0     (23.4)

</TABLE>

Other expense for the three months ended March 31, 1996 and 1995 
included after-tax net realized capital gains of $3 million and 
after-tax net realized capital losses of $2 million, respectively.  
Excluding net realized capital gains and losses, the decrease of 
$3 million in other expenses in 1996 primarily resulted from a 
reduction in corporate staff area expenses associated with 
continued cost reduction efforts.

In conjunction with the sale of the company's property-casualty 
operations, Travelers subleased the space currently occupied by 
the company in the CityPlace office facility in Hartford for eight 
years at current market rates.  The company will reflect a charge 
of approximately $190 million (after tax) in the second quarter of 
1996 representing the present value of the difference between rent 
required to be paid by the company under the lease and future 
rentals expected to be received by the company.  The company also 
expects to reflect additional severance and facilities charges in 
the second quarter of 1996 of approximately $45 million (after 
tax) due to actions expected to be taken to reduce the level of 
corporate expenses and other costs previously absorbed by the 
property-casualty operations.


<PAGE> 35

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Discontinued Operations - Property-Casualty Operations
______________________________________________________

<TABLE>
<CAPTION>

Operating Summary
(Millions)                                 Three Months Ended March 31    
                                       ___________________________________
                                       1996         1995          % Change
                                       ____         ____          ________

<S>                                    <C>          <C>           <C>

Premiums............................   $ 1,038.4    $ 1,046.9       (.8)%
Net investment income...............       242.9        215.9      12.5
Fees and other income...............        18.3         22.6     (19.0)
Net realized capital gains..........       239.7          6.8         -
                                       _________    _________          
   Total revenue....................     1,539.3      1,292.2      19.1

Current and future benefits.........       964.0        842.1      14.5
Operating expenses..................       151.9        198.5     (23.5)
Amortization of deferred policy
 acquisition costs..................       160.7        155.1       3.6
                                       _________    _________          
   Total benefits and expenses......     1,276.6      1,195.7       6.8
                                       _________    _________          

Income before income taxes..........       262.7         96.5     172.2
Income taxes........................        80.5         28.1     186.5
                                       _________    _________          

Net income..........................   $   182.2    $    68.4     166.4
                                       _________    _________          
                                       _________    _________          
Net realized capital gains,
 net of tax (included above)........   $   156.4    $     3.6         -
                                       _________    _________          
                                       _________    _________          

Statutory combined loss and
 expense ratio......................       125.9%       111.1%        -
                                       _________    _________          
                                       _________    _________          
GAAP combined loss and expense ratio       123.9%       112.7%        -
                                       _________    _________          
                                       _________    _________          
Catastrophe loss ratio (included 
 in combined ratios above)..........         6.6%         1.9%        -
                                       _________    _________          
                                       _________    _________          
</TABLE>

Discontinued Operations' net income for the three months ended 
March 31, 1996 increased $114 million compared with the same 
period a year ago.  Excluding net realized capital gains, results 
for the three months ended March 31, 1996 decreased $39 million 
from the prior year primarily reflecting increased catastrophe 
losses due to winter storms of $44 million (after-tax and net of 
reinsurance) ($91 million pretax and before reinsurance) for the 
three months ended March 31, 1996 compared to $13 million (after 
tax and net of reinsurance) ($27 million pretax and before 
reinsurance) for the three months ended March 31, 1995.

Net realized capital gains (after tax) in the first quarter of 
1996 include $129 million from the sale of equity securities and 
$33 million from the sale of debt securities in connection with 
the agreement to sell the property-casualty operations.

As a result of the sale, the company retained no property-casualty 
liabilities other than those associated with indemnifying 
Travelers for a portion of certain potential liability exposures.  
While there can be no assurances, management currently does not 
believe that the aggregate ultimate loss arising from these 
indemnifications, if any, will be material to the annual net 
income, liquidity or financial condition of the company, although 
it is reasonably possible.


<PAGE> 36

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments
___________________________

Investment-related amounts disclosed in the following investment 
section relate to assets supporting continuing operations 
(including assets supporting discontinued products and experience 
rated products).  Please see Note 4 of Condensed Notes to 
Financial Statements for assets supporting Discontinued 
Operations.
           

The company's invested assets were comprised of the following, net 
of impairment reserves:

<TABLE>
<CAPTION>
                                                  March 31,     December 31,
(Millions)                                          1996            1995    
____________________________________________________________________________

<S>                                               <C>           <C>

Debt securities:
  Available for sale, at fair value
    (amortized cost $29,687.7 and $29,962.5)      $ 30,344.9    $ 31,860.3
Equity securities, at fair value
    (cost $785.1 and $597.8)                           929.1         659.7
Short-term investments                                 637.5         607.8
Mortgage loans                                       7,947.8       8,327.2
Real estate                                          1,301.9       1,277.3
Policy loans                                           639.2         629.4
Other                                                  689.4         688.6
__________________________________________________________________________
    Total invested assets                         $ 42,489.8    $ 44,050.3
__________________________________________________________________________
                                                  ________________________
</TABLE>

Please refer to the company's 1995 Annual Report to Shareholders for 
a description of the company's investment objectives and policies.

The change in the invested assets portfolio from December 31, 1995 to 
March 31, 1996 primarily reflected depreciation of debt securities 
due to an increase in interest rates and a net decrease in the 
aggregate mortgage loan and real estate portfolios.  Debt securities 
reflected net unrealized capital gains of $657 million at March 31, 
1996, compared with net unrealized capital gains of $1.9 billion at 
December 31, 1995.  Of such net unrealized capital gains at March 31, 
1996, $179 million and $314 million related to assets supporting 
discontinued products and experience rated pension contractholders, 
respectively.  The net decrease in the aggregate mortgage loan and 
real estate portfolios of $355 million principally reflected 
prepayments, payments at maturity on mortgage loans, write-offs on 
foreclosures and sales of foreclosed properties.

The risks associated with investments supporting experience rated 
pension and annuity products are assumed by those customers subject 
to, among other things, certain minimum guarantees.  The anticipated 
future losses associated with investments supporting discontinued 
fully guaranteed large case pension products were provided for in the 
reserve established upon discontinuance of those products.


<PAGE> 37

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

Debt Securities

As of March 31, 1996 and December 31, 1995, the company's 
investments in debt securities represented 71% and 72%, 
respectively, of total general account invested assets and were as 
follows:

<TABLE>

<CAPTION>
                                           March 31,          December 31,
(Millions)                                   1996                 1995    
__________________________________________________________________________

<S>                                        <C>                <C>

Supporting discontinued products           $ 5,452.5          $ 5,765.2
Supporting experience rated products        13,552.0           14,243.4
Supporting remaining products               11,340.4           11,851.7
                                           ____________________________
   Total debt securities                   $30,344.9          $31,860.3
                                           ____________________________
                                           ____________________________
</TABLE>

Included in the company's debt security balances were the 
following categories of debt securities:

<TABLE>
<CAPTION>
(Millions)                                                   March 31, 1996                            
_______________________________________________________________________________________________________
                                       "Below Investment        "Problem" Debt      "Potential Problem"
                                       Grade" Securities        Securities          Debt Securities    
                                       _________________        ______________      ___________________

<S>                                    <C>                      <C>                 <C>

Total                                  $1,727.3                 $   72.5            $  104.3
                                       ________                 ________            ________
                                       ________                 ________            ________
Percentage of total:
  Supporting discontinued products         28.8%                    36.7%               49.6%
  Supporting experience rated products     45.4                     12.7                20.8
  Supporting remaining products            25.8                     50.6                29.6
                                       ________                 ________            ________
                                          100.0%                   100.0%              100.0%
                                       ________                 ________            ________ 
                                       ________                 ________            ________ 

                                                             December 31, 1995                         
                                       ________________________________________________________________
                                       "Below Investment        "Problem" Debt      "Potential Problem"
                                       Grade" Securities        Securities          Debt Securities    
                                       _________________        ______________      ___________________

<S>                                    <C>                      <C>                 <C>

Total                                  $1,623.8                 $   81.0            $   90.4
                                       ________                 ________            ________
                                       ________                 ________            ________
Percentage of total:
  Supporting discontinued products         32.7%                    36.9%               57.5%
  Supporting experience rated products     42.6                     12.5                24.1
  Supporting remaining products            24.7                     50.6                18.4
                                       ________                 ________            ________
                                          100.0%                   100.0%              100.0%
                                       ________                 ________            ________ 
                                       ________                 ________            ________ 
</TABLE>

"Below investment grade" securities (which include "problem" debt 
securities and "potential problem" debt securities described 
below) are defined to be securities that carry a rating below BBB-
/Baa3.  Such debt securities have been written down for other than 
temporary declines in value.

Management defines "problem" debt securities to be securities for 
which payment is in default, securities of issuers which are 
currently in bankruptcy or in out-of-court reorganizations, or 
securities of issuers for which bankruptcy or reorganization 
within six months is considered likely.


<PAGE> 38

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

"Potential problem" debt securities are currently performing debt 
securities for which neither payment default nor debt 
restructuring is anticipated within six months, but whose issuers 
are experiencing significant financial difficulties.  Identifying 
such potential problem debt securities requires significant 
judgment as to likely future market conditions and developments 
specific to individual debt securities.

The company does not accrue interest on problem debt securities 
when management believes the likelihood of collection of interest 
is doubtful.  Lost investment income on problem debt securities 
was as follows:

<TABLE>
<CAPTION>
                                         Three Months Ended
                                              March 31,    
                                         __________________
(Millions)                               1996        1995  
___________________________________________________________
<S>                                      <C>         <C>
Allocable to discontinued products       $   .3      $   .4
Allocable to experience rated products       .2          .2
Allocable to remaining products              .2          .9
                                         __________________
  Total lost investment income           $   .7      $  1.5
                                         __________________
                                         __________________

</TABLE>

Included in the company's total collateralized mortgage 
obligations ("CMOs") balances were the following categories of 
CMOs:

<TABLE>
<CAPTION>
(Millions)                                   March 31, 1996             December 31, 1995
_______________________________________________________________      _______________________
                                         Fair         Amortized      Fair         Amortized
                                         Value          Cost         Value          Cost
                                         _________    _________      ________     _________
<S>                                      <C>          <C>            <C>          <C>      
Total CMOs (1)                           $ 2,866.9    $ 2,776.7      $ 3,191.1    $ 2,984.4
                                         _________    _________      _________    _________
                                         _________    _________      _________    _________
Percentage of total CMOs: 
  Sequential and planned
    amortization class bonds                  70.5%                       73.1%
   Z-tranches                                 16.9                        15.2
   Interest-only strips and
     principal-only strips                     3.6                         3.2
   Other                                       9.0                         8.5
                                         _________                   _________
                                             100.0%                      100.0%
                                         _________                   _________ 
                                         _________                   _________ 

<FN>
(1)  At March 31, 1996 and December 31, 1995, approximately 70% and 74%, respectively, 
     of the company's CMO holdings were collateralized by residential mortgage loans, 
     on which the timely payment of principal and interest is backed by specified 
     government agencies (e.g., GNMA, FNMA, FHLMC).

</TABLE>


<PAGE> 39

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

The principal risks inherent in holding CMOs are prepayment and extension 
risks related to dramatic decreases and increases in interest rates whereby 
the value of the CMOs would be subject to variability on the repayment of 
principal from the underlying mortgages earlier or later than originally 
anticipated.  The various categories of CMOs are subject to different 
degrees of risk from changes in interest rates and defaults (for non-agency-
backed bonds).  Sequential and planned amortization class bonds are subject 
to less prepayment and extension risk than other CMO instruments. Interest-
only strips ("IOs") receive payments of interest and principal-only strips 
("POs") receive payments of principal on the underlying pool of residential 
mortgages.  The company has mitigated the risks associated with holding IOs 
and POs by holding positions in both types of instruments such that exposure 
from significant changes in interest rates is reduced.  Z-tranches receive 
principal payments from the underlying mortgage pool only after all other 
priority classes have been retired.

Mortgage Loans

During the first quarter of 1996, the mortgage loan portfolio was 
reduced 5% to $7.9 billion, net of impairment reserves.  The 
company's total mortgage loan investments, net of impairment 
reserves, supported the following types of business:

<TABLE>
<CAPTION>
                                      March 31,           December 31,
(Millions)                              1996                  1995    
______________________________________________________________________
<S>                                   <C>                 <C>
Supporting discontinued products      $ 3,248.1           $ 3,388.6
Supporting experience rated products    2,440.9             2,642.6
Supporting remaining products           2,258.8             2,296.0
                                      _____________________________
   Total mortgage loan investments    $ 7,947.8           $ 8,327.2
                                      _____________________________
                                      _____________________________

</TABLE>

During the first quarter of 1996, the company continued to manage its 
mortgage loan portfolio to reduce the balance in absolute terms and 
relative to invested assets, and to reduce its overall risk.  The 
principal balance of mortgage loans decreased $511 million since 
December 31, 1995 primarily reflecting the effect of repayments of 
maturing loans, loan prepayments and foreclosures.

Loans with a principal balance of $135 million and collateral with a 
fair market value of $37 million were foreclosed upon in the first 
quarter of 1996.  Additional loans with a principal balance of 
$91 million were in the process of foreclosure at March 31, 1996.  In 
certain cases, the company has taken substantive possession of the 
property supporting its loan, coupled with the borrower surrendering 
its interest in the future economic benefits in the property.  Where 
this has occurred, the loans are considered in-substance 
foreclosures, written down to their fair market value less selling 
costs and classified as real estate held for sale.  At March 31, 1996 
and December 31, 1995, there were $136 million and $190 million, 
respectively, of in-substance foreclosures (net of write-offs of 
$72 million and $126 million, respectively).


<PAGE> 40

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________


Included in the company's total mortgage loan balances were the 
following categories of mortgage loans:

<TABLE>
<CAPTION>
(Millions)                                                        March 31, 1996                          
__________________________________________________________________________________________________________
                                                           Restructured      Potential
                                       Problem Loans       Loans             Problem Loans      Total
                                       _____________       ____________      _____________      _____
<S>                                    <C>                 <C>               <C>                <C>

Total                                  $  201.2            $  494.8          $  703.7           $1,399.7
                                       ________            ________          ________           ________
                                       ________            ________          ________           ________
Percentage of total:
  Supporting discontinued products         24.2%               53.4%             46.8%
  Supporting experience rated products     35.9                26.2              27.5
  Supporting remaining products            39.9                20.4              25.7
                                       ________            ________          ________
                                          100.0%              100.0%            100.0%
                                       ________            ________          ________ 
                                       ________            ________          ________ 
Impairment reserves on loans (1)                                                                $  473.6
                                                                                                ________
                                                                                                ________

Impairment reserves as a percentage
 of total                                                                                           33.8%
                                                                                                ________ 
                                                                                                ________ 

                                                               December 31, 1995                          
__________________________________________________________________________________________________________
                                                           Restructured      Potential
                                       Problem Loans       Loans             Problem Loans      Total
                                       _____________       ____________      _____________      _____
<S>                                    <C>                 <C>               <C>                <C>

Total                                  $  160.3            $  514.1          $  839.1           $1,513.5
                                       ________            ________          ________           ________
                                       ________            ________          ________           ________
Percentage of total:
  Supporting discontinued products         22.6%               50.9%             54.3%
  Supporting experience rated products     39.7                30.7              25.2
  Supporting remaining products            37.7                18.4              20.5
                                       ________            ________          ________
                                          100.0%              100.0%            100.0%
                                       ________            ________          ________ 
                                       ________            ________          ________ 
Impairment reserves on loans (1)                                                                $  604.9
                                                                                                ________
                                                                                                ________

Impairment reserves as a percentage
 of total                                                                                           40.0%
                                                                                                ________ 
                                                                                                ________ 

<FN>

(1) Please see Note 6 of Condensed Notes to Financial Statements for composition of
    impairment reserves between specific and general impairment reserves.
</TABLE>

"Problem loans" are defined to be loans with payments over 60 days 
past due, loans on properties in the process of foreclosure, loans on 
properties involved in bankruptcy proceedings and loans on properties 
subject to redemption.  Loans on properties in the process of 
foreclosure decreased to $91 million at March 31, 1996 from 
$101 million at December 31, 1995.


<PAGE> 41

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

"Restructured loans" are loans whose original contract terms have 
been modified to grant concessions to the borrower and are 
currently performing pursuant to such modified terms.  
Restructured loans that have a market rate of interest at the time 
of the restructure (which represents the interest rate the company 
would charge for a new loan with comparable risk) and demonstrate 
sustainable performance (as generally evidenced by six months of 
pre- or post-restructuring payment performance in accordance with 
the restructured terms) may be returned to performing status.  
(Please see the company's 1995 Annual Report to Shareholders for a 
complete description of the company's restructuring program.)  No 
such restructures and transfers to performing status occurred 
during the three month period ended March 31, 1996.

"Potential problem loans" include all loans which are performing 
pursuant to existing terms and are considered likely to become 
classified as problem or restructured loans.  Such loans are 
identified through the portfolio review process on the basis of 
known information about the ability of borrowers to comply with 
present loan terms.  Identifying such potential problem loans 
requires significant judgment as to likely future market 
conditions and developments specific to individual properties and 
borrowers.  Provision for losses that management believes are 
likely to arise from such potential problem loans is included in 
the specific impairment reserves.  (Please see Note 6 of Condensed 
Notes to Financial Statements for a discussion of mortgage loan 
impairment reserves.)

The company does not accrue interest on problem loans or 
restructured loans when management believes the collection of 
interest is unlikely.  The amount of pretax investment income 
required by the original terms of such problem and restructured 
loans outstanding at March 31 and the portion thereof actually 
recorded as income were as follows:

<TABLE>
<CAPTION>
                                       Three Months Ended
                                           March 31,     
                                       __________________
(Millions)                             1996       1995   
_________________________________________________________

<S>                                    <C>        <C>

Income which would have been
 recorded under original terms
 of loans                              $  17.9    $  28.6

Income recorded                           11.4       10.4
                                       _______    _______

Lost investment income                 $   6.5    $  18.2
                                       _______    _______
                                       _______    _______

Lost investment income allocated to
 investments supporting discontinued
 products (included above)             $   2.6    $   9.5
                                       _______    _______
                                       _______    _______

Lost investment income allocated to
 investments supporting experience
 rated pension products
 (included above)                      $   3.1    $   7.1
                                       _______    _______
                                       _______    _______

Lost investment income allocated to
 investments supporting remaining
 products (included above)             $    .8    $   1.6
                                       _______    _______
                                       _______    _______
</TABLE>

<PAGE> 42

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

Real Estate 

The company's equity real estate balances, net of write-downs and 
reserves, were as follows:

<TABLE>
<CAPTION>

(Millions)                                                   March 31, 1996                     
________________________________________________________________________________________________
                                       Investment               Properties          Total Equity
                                       Real Estate              Held for Sale       Real Estate 
                                       ___________              _____________       ____________

<S>                                    <C>                      <C>                 <C>

Total equity real estate               $  159.5                 $1,142.4 (1)        $1,301.9
                                       ________                 ________            ________
                                       ________                 ________            ________
Percentage of total equity real 
  estate:
  Supporting discontinued products         11.2%                    57.6%
  Supporting experience rated products      7.6                     23.3
  Supporting remaining products            81.2                     19.1
                                       ________                 ________
                                          100.0%                   100.0%
                                       ________                 ________ 
                                       ________                 ________ 

                                                             December 31, 1995                  
                                       _________________________________________________________
                                       Investment               Properties          Total Equity
                                       Real Estate              Held for Sale       Real Estate 
                                       ___________              _____________       ____________

<S>                                    <C>                      <C>                 <C>

Total equity real estate               $  153.0                 $1,124.3 (1)        $1,277.3
                                       ________                 ________            ________
                                       ________                 ________            ________
Percentage of total equity real
  estate:
  Supporting discontinued products          7.5%                    55.5%
  Supporting experience rated products      7.8                     24.4
  Supporting remaining products            84.7                     20.1
                                       ________                 ________
                                          100.0%                   100.0%
                                       ________                 ________ 
                                       ________                 ________ 

<FN>

(1) Includes $136.1 million and $190.4 million of in-substance foreclosures
    at March 31, 1996 and December 31, 1995, respectively.  (Please see "Mortgage
    Loans" on page 39 for discussion of in-substance foreclosures.)

</TABLE>

Real estate which the company has the intent to hold for the 
production of income is classified as investment real estate.  
Investment real estate is carried at depreciated cost plus capital 
additions, net of impairment write downs.

All real estate acquired through foreclosure, including in-
substance foreclosures, is classified as properties held for sale.  
The fair value at foreclosure is established as the new cost basis 
for these assets, which are carried at the lower of cost or fair 
value less estimated selling costs.  As a result of adopting FAS 
No. 121 on January 1, 1996 (please see Note 6 of Condensed Notes 
to Financial Statements), the company no longer depreciates 
properties held for sale.  Adjustments to the carrying value of 
properties held for sale are recorded in a valuation reserve when 
the fair value less estimated selling costs is below cost.  Fair 
value is generally determined using a discounted future cash flow 
analysis in conjunction with comparable sales information.  
Property valuations are reviewed regularly by investment 
management.  The company intends to sell a significant amount of 
the properties held for sale over the next one to two years, real 
estate and capital market conditions permitting.


<PAGE> 43

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

Foreclosed real estate classified as properties held for sale was 
carried at 56% and 61% of the company's cash investment (unpaid 
mortgage balance plus capital additions) at March 31, 1996 and 
December 31, 1995, respectively.  Net investment income included 
$65 million (pretax) from the net operations of properties held 
for sale for the three months ended March 31, 1996.

Total real estate write-downs and valuation reserves on properties 
included in the company's equity real estate balances were as 
follows:

<TABLE>
<CAPTION>
                                            March 31,     December 31,
(Millions)                                    1996           1995     
______________________________________________________________________
<S>                                         <C>           <C>

Allocable to discontinued products          $  462.1      $  381.0
Allocable to experience rated products         213.8         208.2
                                                                  
Allocable to remaining products                 97.4          96.8
                                            ________      ________
   Total real estate write-downs and 
     valuation reserves                     $  773.3 (*)  $  686.0
                                            ________      ________
                                            ________      ________

* As a result of the adoption of FAS No. 121 on January 1, 1996, valuation reserves 
  were increased by $52.9 million in connection with the reversal of previously recorded
  accumulated depreciation related to properties held for sale.  The adoption of FAS No.
  121 resulted in an immaterial impact on results of operations.
</TABLE>

Total after-tax net realized capital gains from real estate write-
downs and changes in the valuation reserves in the first quarter 
of 1996 were $3 million.  Such gains were attributable to 
discontinued products and were credited to the reserve for future 
losses which did not affect the company's results of operations.  
There were no after-tax net realized capital gains or losses from 
real estate write-downs and changes in the valuation reserves in 
the first quarter of 1995.


<PAGE> 44

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

Use of Derivatives and Other Investments

The company's use of derivatives is limited to hedging activity and 
has principally consisted of using foreign exchange forward 
contracts, futures and forward contracts and interest rate swap 
agreements to hedge interest rate risk and currency risk.  These 
instruments, viewed separately, subject the company to varying 
degrees of market and credit risk.  However, when used for hedging, 
the expectation is that these instruments would reduce overall market 
risk.  Market risk is the possibility that future changes in market 
prices may decrease the market value of one or all of these financial 
instruments.  Credit risk arises from the potential inability of 
counterparties to perform under the terms of the contracts.  
Management does not believe that the current level of hedging 
activity will have a material effect on the company's liquidity or 
results of operations.  (Please see Note 8 of Condensed Notes to 
Financial Statements for a discussion of the company's hedging 
activities.)

The company also had investments in certain debt instruments with 
derivative characteristics, including those where market value is 
at least partially determined by, among other things, levels of or 
changes in domestic and/or foreign interest rates (short term or 
long term), exchange rates, prepayment rates, equity markets or 
credit ratings/spreads.  The amortized cost and fair value of 
these securities included in the debt securities portfolio as of 
March 31, 1996 was as follows:

<TABLE>
<CAPTION>
                                                    
                                                     Amortized      Fair      
(Millions)                                           Cost           Value     
_____________________________________________________________________________ 

<S>                                                  <C>            <C>       

Collateralized mortgage obligations:............     $ 2,776.7      $ 2,866.9 
  Interest-only strips (included above).........          40.7           54.8 
  Principal-only strips (included above)........          37.1           48.0 
Structured notes (1)............................         113.9          117.9 
Warrants to purchase debt securities (2)........           2.8            3.8 

<FN>

(1) Represents nonleveraged instruments whose fair values and credit risk are
    based on underlying securities, including fixed-income securities and
    interest rate swap agreements.

(2) Represents the right to purchase specific debt securities and is accounted
    for as a hedge.  Upon exercise, the cost of the warrants will be added to
    the basis of the debt securities purchased and amortized over their lives.

</TABLE>



<PAGE> 45

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Liquidity and Capital Resources
_______________________________

Cash and cash equivalents at March 31, 1996 and December 31, 1995 
were $1.6 billion and $1.7 billion, respectively.  For the three 
months ended March 31, 1996 and 1995, net cash used for operating 
activities was $539 million and $67 million, respectively.

For the first three months of 1996, net cash provided by investing 
activities was $714 million and included $408 million from 
maturities and repayments of mortgage loans and $359 million from 
a net decrease in debt securities.  Net cash provided by investing 
activities of $441 million for the three months ended March 31, 
1995 included $496 million from maturities and repayments of 
mortgage loans.

Short-term borrowings are used from time to time to provide for 
timing differences between receipts and disbursements in various 
portfolios.  The maximum amount of domestic short-term borrowings 
outstanding during the first three months of 1996 was 
$491 million.

The company has extended the maturity of, and adjusted interest 
rates to current market on, certain maturing mortgage loans where 
the borrower was unable to obtain financing elsewhere due to tight 
lending practices by banks and other financial institutions over 
the past several years.  For the three months ended March 31, 
1996, the mortgage loan portfolio generated $376 million in cash 
which included $155 million of payoffs or 39% of scheduled 
maturities, $189 million of prepayments, and $32 million of 
amortization.  Despite various indications that liquidity has 
returned to certain real estate markets, the company expects it 
will continue to extend or refinance maturing loans.

In the second quarter of 1996, the company invested $200 million 
in the common stock of the entity which acquired Aetna's property-
casualty operations.  On April 25, 1996, such investment had a 
market value of approximately $349 million.

The merger of the company and U.S. Healthcare is expected to close 
in the third quarter of 1996 and the company expects to finance 
the transaction with a combination of $5.3 billion in cash ($3.9 
billion from the net proceeds received from the sale of its 
property-casualty operations and $1.4 billion of additional bank 
debt, which may initially be financed with commercial paper) and 
the issuance of $2.7 billion of new Aetna Inc. common stock and 
$0.9 billion of Aetna Inc. mandatorily convertible preferred 
stock.  Pending the closing of this transaction, the company 
expects to invest the proceeds from the sale of its property-
casualty operations in high quality short-term investments.

As indicated above, a portion of the approximately $8.9 billion of 
consideration to be paid in connection with the merger will be 
raised through the issuance of new common and mandatorily 
convertible preferred stock.  The additional shares of common and 
mandatorily convertible preferred stock expected to be issued 
would increase the common shares outstanding by approximately 31% 
(or by approximately 40% assuming the conversion of the 
mandatorily convertible preferred stock into common stock).


<PAGE> 46

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Liquidity and Capital Resources (Continued)
___________________________________________

The annual amortization of goodwill and other intangibles expected 
to occur as a result of the merger with U.S. Healthcare is 
expected to be material to earnings, but is not expected to affect 
the liquidity and capital resources of the company.

Pursuant to shelf registration statements declared effective by 
the Securities and Exchange Commission, the company may offer and 
sell up to $550 million of various types of securities, and Aetna 
Capital L.L.C., a subsidiary of the company, may offer and sell up 
to an additional $225 million of preferred securities.

Rating Agencies

The ratings of Aetna Life and Casualty Company and certain of its 
subsidiaries at February 6, 1996, as set forth in the 1995 Form 10-K, 
and at April 26, 1996 follow:

<TABLE>
<CAPTION>
                                                    Rating Agencies                      
                             ____________________________________________________________
                                                             Moody's Investors   Standard
                             A.M. Best      Duff & Phelps        Service         & Poor's
                             ____________________________________________________________
<S>                               <C>       <C>                  <C>             <C>
Aetna Life and Casualty Company
  (senior debt)
    February 6, 1996              *         A   **               A2              A-  **
    April 26, 1996                *         A   **               A2 **           A-  ****

Aetna Life and Casualty Company
  (commercial paper)
    February 6, 1996              *         D-1 **               P-1             A-2 **
    April 26, 1996                *         D-1 **               P-1             A-2 ****

Aetna Life Insurance Company
  (claims paying) 
    February 6, 1996              A         AA- **               Aa3             A+  **
    April 26, 1996                A  ***    AA- **               Aa3             A+  ****

Aetna Life Insurance and Annuity Company
  (claims paying)
    February 6, 1996              A+        AA+                  Aa2             AA  **
    April 26, 1996                A+ ***    AA+                  Aa2             AA  ****

<FN>

*      Not rated by the agency.
**     On rating watch-up or credit watch with positive implications.
***    On rating watch with developing implications.
****   On credit watch negative.

</TABLE>

Dividends

On February 23, 1996, the Board of Directors declared a quarterly 
dividend of $.69 per share of common capital stock for 
shareholders of record at the close of business on April 26, 1996, 
payable May 15, 1996.

Upon consummation of the merger with U.S. Healthcare, the company 
intends to adopt a dividend policy to maintain an annual payout of 
10% - 20% of operating earnings before amortization of goodwill 
and other intangibles.  Pursuant to the merger agreement, the 
company has agreed that initially after the consummation of the 
merger, subject to applicable law, the annual dividend on Aetna 
Inc. common stock will not be less than $0.80 per share.


<PAGE> 47

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

New Accounting Pronouncements
_____________________________

Please see Note 3 of Condensed Notes to Financial Statements for a 
discussion of recently issued accounting pronouncements.

Forward-Looking Information
___________________________

The Private Securities Litigation Reform Act of 1995 (the "Act") 
provides a new "safe harbor" for forward-looking statements to 
encourage companies to provide prospective information about their 
companies, so long as those statements are identified as forward-
looking and are accompanied by meaningful cautionary statements 
identifying important factors that could cause actual results to 
differ materially from those discussed in the statement.  The 
company desires to take advantage of the new "safe harbor" 
provisions of the Act.  Certain information contained herein, 
particularly the information relating to synergies anticipated 
upon completion of the merger with U.S. Healthcare appearing under 
the heading "Overview" herein, is forward-looking.  The estimate 
of synergies is based upon a variety of assumptions relating to 
the business of the company and U.S. Healthcare which may not be 
realized and are subject to significant uncertainties and 
contingencies, many of which are beyond the control of the company 
and U.S. Healthcare.  For example, the achievement of such 
synergies depends upon, among other things, (i) the successful 
offering of U.S. Healthcare managed care products to existing 
company corporate customers and cross-selling of company group 
life, specialty health and other products through U.S. 
Healthcare's existing network; (ii) timely integration of U.S. 
Healthcare management and information systems with those of the 
company; (iii) timely elimination of redundant administrative 
expenses; and (iv) achievement of revenue enhancements and medical 
cost reductions.  See also prior SEC filings for additional 
factors that may affect the company's health and other businesses.


<PAGE> 48

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings.

The company is continuously involved in numerous lawsuits arising, 
for the most part, in the ordinary course of its business 
operations as an insurer.  While the ultimate outcome of such 
litigation cannot be determined at this time, such litigation, net 
of reserves established therefor, is not expected to result in 
judgments for amounts material to the financial condition of the 
company, although it may adversely affect results of operations in 
future periods.

Item 5.  Other Information.

(a)  NAIC IRIS Ratios

The NAIC IRIS ratios cover 12 categories of financial data with 
defined usual ranges for each category.  The ratios are intended 
to provide insurance regulators "early warnings" as to when a 
given company might warrant special attention.  An insurance 
company may fall out of the usual range for one or more ratios and 
such variances may result from specific transactions that are in 
themselves immaterial or eliminated at the consolidated level.  As 
of the date of this filing, none of Aetna Life and Casualty 
Company's significant subsidiaries had more than two IRIS ratios 
that were outside of the NAIC usual ranges for 1995.

(b)  Ratios of Earnings to Fixed Charges and Earnings to 
     Combined Fixed Charges and Preferred Stock Dividends

The following table sets forth the company's ratio of earnings to 
fixed charges and ratio of earnings to combined fixed charges and 
preferred stock dividends for the periods indicated.

<TABLE>

<CAPTION>
                                          Three Months Ended           Years ended December 31       
                                                                 ____________________________________
                                            March 31, 1996       1995    1994    1993    1992    1991
                                          __________________     ____    ____    ____    ____    ____

<S>                                       <C>                    <C>     <C>     <C>     <C>     <C>

Ratio of Earnings to Fixed Charges....    6.04                   4.97    4.74    (a)     1.90     .54(b)
Ratio of Earnings to Combined Fixed
 Charges and Preferred Stock Dividends    6.04                   4.97    4.74    (a)     1.90     .54(b)

<FN>

(a) The company reported a pretax loss from continuing operations in 1993 which was
    inadequate to cover fixed charges by $1.0 billion.

(b) Earnings were inadequate to cover fixed charges by $92.0 million in 1991.

</TABLE>


<PAGE> 49

Item 5.  Other Information.  (Continued)

For purposes of computing both the ratio of earnings to fixed 
charges and the ratio of earnings to combined fixed charges and 
preferred stock dividends, "earnings" represent consolidated 
earnings from continuing operations before income taxes, cumulative 
effect adjustments and extraordinary items plus fixed charges and 
minority interest.  "Fixed charges" consist of interest (and the 
portion of rental expense deemed representative of the interest 
factor) and includes the dividends paid to preferred shareholders 
of a subsidiary.  (See Note 11 of Notes to Financial Statements in 
the company's 1995 Annual Report to Shareholders.)  For the three 
months ended March 31, 1996 and for the years ended December 31, 
1995, 1994, 1993, 1992 and 1991 there was no preferred stock 
outstanding.  As a result, the ratios of earnings to combined fixed 
charges and preferred stock dividends were the same as the ratios 
of earnings to fixed charges.

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

  (a) Exhibits

      (4)    Instruments defining the rights of security holders, 
             including indentures.

      (4.1)  Conformed copy of Amendment No. 1 to Rights 
             Agreement dated as of December 19, 1995, between 
             Aetna Life and Casualty Company and First Chicago 
             Trust Company of New York, incorporated herein by 
             reference to the company's Form 8-A filed on December 
             19, 1995.

      (10)   Material contracts

      (10.1) Agreement and Plan of Merger, dated as of March 30, 
             1996, among Aetna Life and Casualty Company, U.S. 
             Healthcare, Inc., Aetna Inc. (formerly named 
             Butterfly, Inc.), Antelope Sub, Inc. and New Merger 
             Corporation.

      (10.2) Voting Agreement, dated as of March 30, 1996, among 
             Leonard Abramson, Aetna Life Insurance Company and 
             Aetna Life Insurance and Annuity Company.

      (10.3) Registration Rights Agreement, dated as of March 30, 
             1996, between Aetna Inc. (formerly named Butterfly, 
             Inc.) and Leonard Abramson.

      (10.4) Agreement, dated as of March 30, 1996, by and between
             Aetna Inc. and Leonard Abramson.

      (10.5) Letter Agreement, dated January 31, 1996, between Aetna
             Life and Casualty Company and The Travelers Insurance
             Group Inc.

      (10.6) Amendment, dated April 2, 1996, to Stock Purchase 
             Agreement, dated as of November 28, 1995, between
             Aetna Life and Casualty Company and The Travelers
             Insurance Group Inc.


<PAGE> 50

Item 6.  Exhibits and Reports on Form 8-K (Continued).

  (a) Exhibits (Continued)

      (12)   Statement Re Computation of Ratios.

      (12.1) Computation of ratio of earnings to fixed charges and 
             ratio of earnings to combined fixed charges and 
             preferred stock dividends for the three months ended 
             March 31, 1996 and for the years ended December 31, 
             1995, 1994, 1993, 1992 and 1991.

      (15)   Letter Re Unaudited Interim Financial Information.

      (15.1) Letter from KPMG Peat Marwick LLP acknowledging 
             awareness of the use of a report on unaudited interim 
             financial information, dated April 25, 1996.

      (27)   Financial Data Schedule.

  (b) Reports on Form 8-K

      None.

<PAGE> 51

                       SIGNATURES

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






                             Aetna Life and Casualty Company
                             _______________________________
                                       (Registrant)


Date  April 26, 1996         By   /s/  Robert J. Price         
                                 ______________________________
                                              (Signature)

                                       Robert J. Price
                                       Vice President
                                       and Corporate Controller
                                       (Chief Accounting Officer)

