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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported) March 30, 1996
____________________
Aetna Life and Casualty Company
_______________________________________________________________________
(Exact name of registrant as specified in its charter)
Connecticut
_______________________________________________________________________
(State or other jurisdiction of incorporation)
1-5704 06-0843808
_______________________________________________________________________
(Commission File Number) (I.R.S. Employer
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
__________________
Not Applicable
_______________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
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TABLE OF CONTENTS
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Page
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Item 5. Other Events. 3
Item 7(c). Exhibits. 5
Signatures 6
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Item 5. Other Events.
Aetna Life and Casualty Company (Aetna) and U.S. Healthcare, Inc.
(U.S. Healthcare) entered into a definitive agreement, dated March
30, 1996, pursuant to which they have agreed to merge in a
transaction valued at $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., domiciled
in Connecticut. 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. Each share of Aetna stock will
become a share of Aetna Inc. stock. The combined company will be
78 percent owned by Aetna shareholders and 22 percent owned by
U.S. Healthcare shareholders.
The merger will be financed with a combination of $5.3 billion in
cash, the issuance of $2.7 billion of new Aetna Inc. common stock,
and $0.9 billion in preferred securities. The Aetna and U.S.
Healthcare health businesses will be in wholly owned subsidiaries
of Aetna Inc., with each subsidiary maintaining its current name.
Aetna Chairman Ronald E. Compton will be chairman and CEO of the
new company. U.S. Healthcare Chairman Leonard Abramson will join
Aetna's board of directors and will serve as a strategic
consultant to Compton. Two additional directors nominated by
Abramson also will be named to the Aetna Inc. board. The
agreement is subject to approval by the shareholders of both
companies and federal and state regulators, the close of the
previously announced sale of Aetna's property/casualty unit to
Travelers Group, and other customary conditions. It is expected to
close in the third quarter of 1996. Abramson, who is the
controlling shareholder of U.S. Healthcare, has agreed to vote in
favor of the merger. A copy of the press release announcing the
merger agreement is attached hereto as Exhibit 99.1, which exhibit
is incorporated herein by reference.
The Private Securities Litigation Reform Act of 1995 (the "Act")
provides a "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. Aetna
desires to take advantage of the "safe harbor" provisions with
respect to statements it may make concerning the merger. The
following important factors, among others, could affect the
successful integration of the companies and the recognition of
increased earnings or other synergies from the transaction, as
well as the combined company's continuing health operations:
Factors specific to transaction:
- Successful offering of U.S. Healthcare managed care products
to existing Aetna corporate customers and cross-selling of Aetna
group life, specialty health and other products through U.S.
Healthcare's existing network.
- Timely integration of U.S. Healthcare management and
information systems with those of Aetna.
- Timely elimination of redundant administrative expenses.
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Other factors affecting combined company's health operations:
- Increase in Aetna debt relative to total capital resulting
from the merger transaction.
- Achievement of revenue enhancements and medical cost
reductions.
- Success in managing health care costs and operating expenses,
as well as quality of services provided, as affected by
competition in managed care products, changes in health care
practices, inflation, changing medical technologies, and changes
in federal or state laws.
- Adverse changes in federal or state laws, including: (i)
various proposals to reform the federal Medicare program, (ii)
limitations on premium levels, (iii) increases in minimum capital
and reserve and other financial viability requirements, (iv)
prohibition or limitation of capitated arrangements or provider
financial incentives, (v) benefit mandates (including mandatory
length of stay and emergency room coverage), (vi) regulatory
limitations on the ability to manage care and utilization, (vii)
any willing provider or pharmacy laws, and (viii) government
imposed surcharges, taxes or assessments.
- Adverse actions of governmental payers, including unilateral
reduction of Medicare and Medicaid premiums payable to Aetna and
U.S. Healthcare and discontinuance or limitations on
governmentally-funded programs.
- Inability to increase premiums or prospective or retroactive
reductions to premium rates for federal employees apace with
increases in medical costs due to competition, government
regulation or other factors.
- Termination of provider contracts or renegotiation at less
cost-effective rates or terms of payment.
- Price increases in pharmaceuticals, durable medical equipment
and other covered items.
- Denial of accreditation by independent quality accrediting
agencies such as NCQA.
- Selection by employers and individuals of higher
copayment/deductible/coinsurance plans with relatively lower
premiums.
- Migration of employers from insured to self-funded coverage
resulting in reduced margins.
- Impact on medical loss ratio of greater net enrollment in
higher medical loss ratio lines of business such as Medicare and
Medicaid.
Additional Information regarding U.S. Healthcare:
Additional information regarding U.S. Healthcare is contained in
its Form 10-K and other reports filed with the Securities and
Exchange Commission.
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Item 7(c). Exhibits.
Exhibit 99.1 -- Press Release of Aetna Life and Casualty Company
dated April 1, 1996.
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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
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(Registrant)
Date April 1, 1996 By /s/ Robert J. Price
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(Signature)
Robert J. Price
Vice President and
Corporate Controller
(Chief Accounting Officer)