Another Washington Business story should have said the American Association of Retired Persons terminated its group health insurance contract with Colonial Penn Franklin Insurance Co. in 1980, with the split effective in 1981.

The Prudential Insurance Co. apparently has bested the Colonial Penn Franklin Insurance Co. in their $31 million battle to win the group health insurance premium dollars of members of the American Association of Retired Persons. The deadline for 1.7 million policyholders to choose between the carriers passed July 1.

As of this week, Prudential had captured approximately 65 percent of the business.

John P. Cole, Prudential's vice president for group insurance, said he was "delighted and pleased" by the response of senior citizens, which will bring the carrier about $180 million annually.

The contest began two years ago when AARP fired Colonial Penn, its carrier of 20 years, as the result of conflict-of-interest lawsuits, and subsequently awarded the contract for its group health insurance to Prudential in competitive bidding. Colonial Penn, which depended on AARP for 40 percent of its premium dollars, fought hard to retain its old customers. It mounted an $18 million drive, including national television commercials and mailing blitzes, to persuade senior citizens to sever their ties with AARP-sanctioned coverage and stick with the former carrier. At stake was $270 million in annual revenues, representing premiums paid on 1.7 million policies covering 2.5 million people.