HARTFORD, Conn. (AP) _ Aetna Life & Casualty Corp. has signed an agreement to sell its American Re-Insurance Co. subsidiary to buyout specialist Kohlberg Kravis Roberts & Co. for about $1.4 billion.

Under a deal announced Monday, Aetna will receive $1.21 billion in cash, $100 million in notes and $70 million in preferred stock to be issued by American Re Corp., the new holding company for American Re-Insurance.

In addition, Aetna will receive about $30 million of American Re's common stock and retain most of its British operation. Aetna has agreed to provide American Re with certain loss protections.

The sale is subject to regulatory approval.

The deal is perhaps the largest acquisition of an insurance company by leveraged buyout, the takeover tactic that helped drive KKR to fame in the 1980s. In an LBO, a target company is bought with largely borrowed funds.

The agreement also marks KKR's first acquisition valued at more than $1 billion since it took over RJR Nabisco Inc. in 1989 for nearly $25 billion, the largest takeover in corporate history.

Aetna reported in April that it was holding talks with KKR over the sale of American Re-Insurance.

The deal offers a number of advantages for Aetna, including reducing Aetna's underwriting risks, said Aenta Chairman Ronald E. Compton.

''Among the more important benefits is that it enables us to realize significant value from our original investment in AmRe that can be redeployed to other parts of our business,'' Compton said.

The cash will strengthen Aetna's reserves at a time when there is increasing public concern over the adequacy of the reserves that insurers hold to cover excessive policyholder withdrawals.

Like other insurance companies facing with problems in their investment portfolios, Aetna had about $1.4 billion in bad real estate loans and $975 million in foreclosed properties at the end of last year.

Aetna has estimated that problem loans may grow another $1.2 billion this year.

Aetna acquired American Re-Insurance in 1979. Last year the unit, which essentially insures insurance companies, reported profits of $133 million and assets of $3.8 billion. American Re-Insurance is based in Princeton, N.J., and is the nation's third-largest reinsurance company.

Aetna is the nation's largest publicly held insurance company based on its assets, which total $92 billion. The insurer reported net income of $505 million last year.

For KKR, the move represents a further step into financial service companies. In the heady days of leveraged buyouts, KKR focused much of its activity on consumer products companies, acquiring RJR Nabisco, Duracell International Inc., Safeway Stores Inc. and Stop and Shop Cos., among others.

But the buyout firm has shown more recent interest in financial concerns. In 1988 it unsuccessfully attempted to acquire the insurer Farmers Group Inc. Three years later it teemed up with Fleet-Norstar Financial Group Inc. to acquire the ailing Bank of New England.

Last summer KKR also acknowledged it might be interested in acquiring some troubled California thrifts.