This is the final report of Work Package 3 of the AHEAD project, undertaken by the Personal Social Services Research Unit (PSSRU) at the University of Kent. This Work Package has aimed at providing estimations, based on the European Community Household Panel (ECHP), of annual probabilities of transition between health states, including two states regarded as absorbing: permanent institutionalisation and mortality. The purpose of this work is to serve as a building block for estimating healthy life expectancy and forecasting the future health expenditure needs of populations. This report breaks new ground in providing comparative information on rates of long-stay entry into permanent health-care institutions for persons aged over 65. Two definitions of health state are used for this purpose: self-assessed health and a chronic, hampering health condition. After an initial assessment of the ECHP, undocumented problems regarding the reporting of mortality and institutionalisation resulted in a change of strategy. This change involved post-stratification to adjust for mortality and obtaining information about rates of institutionalisation from alternative sources on a country-by-country basis for those countries for which information was available. Yet this approach was not practicable for all of the countries participating in the ECHP. Full results are provided for Belgium, the UK, Ireland and Italy; partial results are provided for Germany, Denmark, the Netherlands, Greece, Portugal and Finland. These results consist of the estimated annual probabilities of transition between health states (including mortality) for adults living in private households, and for persons over 65 the estimated annual probabilities of first-time admission from the community as a long-stay resident of a health-care institution. The results are presented in the form of probit equations, which enable estimates to be prepared by age and gender.