SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q

[X] AMENDMENT TO QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2001

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________________ to ______________________________



Commission file numbers 33-3630, 333-1783 and 333-13609

KEYPORT LIFE INSURANCE COMPANY

(Exact name of registrant as specified in its charter)

|Rhode Island                                                   | 05-0302931                          
|-------------------------------------------------------------- | ------------------------------------
|(State of other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)





|125 High Street, Boston, Massachusetts   | 02110-2712
|---------------------------------------- | ----------
|(Address of principal executive offices) | (Zip Code)



(617) 526-1400

(Registrant's telephone number, including area code)





(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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.     [X] Yes    [   ] No

There were 2,412,000 shares of the registrant's Common Stock, $1.25 par value, outstanding as of March 31, 2001.



Page 1 of 15



KEYPORT LIFE INSURANCE COMPANY

QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2001



TABLE OF CONTENTS



|Part I.       | FINANCIAL INFORMATION                                                  | Page
|------------- | ---------------------------------------------------------------------- | ----
|              |                                                                        |     
|Item 1.       | Financial Statements                                                   |     
|              |                                                                        |     
|              | Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000 | 3   
|              |                                                                        |     
|              | Consolidated Statements of Operations for the Three Months             |     
|              | Ended March 31, 2001 and 2000                                          | 4   
|              |                                                                        |     
|              | Consolidated Statement of Cash Flows for the Three Months Ended        |     
|              | March 31, 2001 and 2000                                                | 5   
|              |                                                                        |     
|              | Notes to Consolidated Financial Statements                             | 6   
|              |                                                                        |     
|Item 2.       | Management's Discussion and Analysis of Results of Operations and      |     
|              | Financial Condition                                                    | 7-12
|              |                                                                        |     
|              |                                                                        |     
|Part II.      | OTHER INFORMATION                                                      |     
|              |                                                                        |     
|Item 6.       | Exhibits and Reports on Form 8-K                                       | 12  
|              |                                                                        |     
|Signatures    |                                                                        | 13  
|              |                                                                        |     
|Exhibit Index |                                                                        | 14  





2

KEYPORT LIFE INSURANCE COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands)



|                                                                 | March 31,    | December 31,
|---------------------------------------------------------------- | ------------ | ------------
|ASSETS                                                           | 2001         |             
|                                                                 | (Unaudited)  |             
|                                                                 |              |             
|Cash and investments:                                            |              |             
|Bonds - available for sale (amortized cost:  2001 - $10,759,968; |              |             
|2000 - $10,728,519)                                              | $ 10,885,049 |             
|Equity securities (cost:  2001 - $79,906; 2000 - $71,489)        | 69,859       |             
|Mortgage loans                                                   | 8,892        |             
|Policy loans                                                     | 623,158      |             
|Other invested assets                                            | 599,059      |             
|Cash and cash equivalents                                        | 1,742,342    |             
|Total cash and investments                                       | 13,928,359   |             
|                                                                 |              |             
|Accrued investment income                                        | 153,211      |             
|Deferred policy acquisition costs                                | 566,426      |             
|Intangible assets                                                | 15,256       |             
|Receivable for investments sold                                  | 97,677       |             
|Other assets                                                     | 120,829      |             
|Separate account assets                                          | 3,903,714    |             
|                                                                 |              |             
|Total assets                                                     | $ 18,785,472 |             
|                                                                 |              |             
|LIABILITIES AND STOCKHOLDER'S EQUITY                             |              |             
|                                                                 |              |             
|Liabilities:                                                     |              |             
|Policy liabilities                                               | $ 12,022,464 |             
|Income taxes payable                                             | 42,279       |             
|Deferred income taxes                                            | 118,431      |             
|Payable for investments purchased and loaned                     | 1,388,368    |             
|Other liabilities                                                | 42,631       |             
|Separate account liabilities                                     | 3,882,871    |             
|Total liabilities                                                | 17,497,044   |             
|                                                                 |              |             
|Stockholder's equity:                                            |              |             
|Common stock, $1.25 par value; authorized 8,000 shares;          |              |             
|issued and outstanding 2,412 shares                              | 3,015        |             
|Additional paid-in capital                                       | 505,933      |             
|Retained earnings                                                | 773,729      |             
|Accumulated other comprehensive income (loss)                    | 5,751        |             
|Total stockholder's equity                                       | 1,288,428    |             
|                                                                 |              |             
|Total liabilities and stockholder's equity                       | $ 18,785,472 |             

See accompanying notes

3

KEYPORT LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

Unaudited



|                                                                          | Three-months Ended
|------------------------------------------------------------------------- | ------------------
|                                                                          | March 31,         
|                                                                          | 2001              
|                                                                          |                   
|Revenues:                                                                 |                   
|Net investment income, including distributions from                       |                   
|private equity limited partnerships                                       | $   234,919       
|Interest credited to policyholders                                        | 148,494           
|Investment spread                                                         | 86,425            
|Net realized investment losses                                            | (14,372)          
|Net derivative losses                                                     | (3,823)           
|Net change in unrealized and undistributed                                |                   
|gains in private equity limited partnerships                              | 2,656             
|Fee income:                                                               |                   
|Surrender charges                                                         | 3,743             
|Separate account income                                                   | 12,841            
|Management fees                                                           | 1,864             
|Total fee income                                                          | 18,448            
|                                                                          |                   
|Expenses:                                                                 |                   
|Policy benefits                                                           | 1,221             
|Operating expenses                                                        | 16,888            
|Amortization of deferred policy acquisition costs                         | 32,732            
|Amortization of intangible assets                                         | 314               
|Total expenses                                                            | 51,155            
|                                                                          |                   
|Income before income taxes and cumulative effect                          |                   
|of a change in accounting principle                                       | 38,179            
|Income tax expense                                                        | 7,781             
|                                                                          |                   
|Income before cumulative effect of a change in accounting principle       | 30,398            
|Cumulative effect of a change in accounting principle for derivatives and |                   
|hedging activities; net of tax                                            | (54,275)          
|                                                                          |                   
|Net (loss) income                                                         | $   (23,877)      

See accompanying notes

4

KEYPORT LIFE INSURANCE COMPANY

CONSOLIDATED CASH FLOWS

(in thousands)

Unaudited



|                                                            | Three-months Ended
|----------------------------------------------------------- | ------------------
|                                                            | March 31,         
|                                                            | 2001              
|                                                            |                   
|                                                            |                   
|Cash flows from operating activities:                       |                   
|Net (loss) income                                           | $    (23,877)     
|Cumulative effect of change in accounting principles        | 54,275            
|Adjustments to reconcile net income to net cash             |                   
|provided by operating activities:                           |                   
|Interest credited to policyholders                          | 148,494           
|Net realized investment losses                              | 14,372            
|Net change in unrealized and undistributed gains in private |                   
|equity limited partnerships                                 | 2,656             
|Net (accretion)amortization on investments                  | (4,399)           
|Change in deferred policy acquisition costs                 | (17,347)          
|Change in current and deferred                              |                   
|income taxes                                                | 1,111             
|Net change in other assets and liabilities                  | (34,938)          
|Net cash provided by operating activities                   | 140,347           
|                                                            |                   
|Cash flows from investing activities:                       |                   
|Investments purchased - available for sale                  | (1,150,319)       
|Investments sold - available for sale                       | 1,078,282         
|Investments matured - available for sale                    | 5,341             
|Increase in policy loans                                    | (2,334)           
|Decrease in mortgage loans                                  | 541               
|Other invested assets sold, net                             | 216,042           
|Net cash provided by investing activities                   | 147,553           
|                                                            |                   
|Cash flows from financing activities:                       |                   
|Withdrawals from policyholder accounts                      | (642,127)         
|Deposits to policyholder accounts                           | 388,883           
|(Decrease) increase in securities lending                   | (20,593)          
|Net cash (used in) provided by financing activities         | (273,837)         
|                                                            |                   
|Change in cash and cash equivalents                         | 14,063            
|Cash and cash equivalents at beginning of period            | 1,728,279         
|Cash and cash equivalents at end of period                  | $ 1,742,342       

See accompanying notes

5

KEYPORT LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. General

The accompanying unaudited consolidated financial statements of Keyport Life Insurance Company (the Company) includes all adjustments, consisting of normal recurring accruals that management considers necessary for a fair
presentation of the Company's financial position as of March 31, 2001 and December 31, 2000 and the related consolidated statements of operations and cash flows for the three-month periods ended March 31, 2001 and 2000, respectively. Certain footnote
disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission.
Therefore, these consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in the Company's 2000 Form 10-K. The results of operations for the three-month period ended March 31, 2001 are
not necessarily indicative of the results to be expected for the full year.

2. Change in Accounting Principle

The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an amendment of SFAS No. 133" on January 1, 2001. The Statement requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset by the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in operations.

The cumulative effect, reported after tax and net of related effects on deferred policy acquisition costs, upon adoption of the Statement at January 1, 2001 decreased net income and stockholder's equity by $54.3 million. The adoption
of the Statement may increase volatility in future reported income due, among other reasons, to the requirements of defining an effective hedging relationship under the Statement as opposed to certain hedges the Company believes are effective economic
hedges. The Company anticipates that it will continue to utilize its current risk management philosophy, which includes the use of derivative instruments.

3. Accounting for Derivatives and Hedging Activities

All derivatives are recognized on the balance sheet at fair value. On the date the derivative contract is entered into, the Company designates the derivative as either (1) a hedge of the fair value of a recognized asset ("fair
value hedge") or (2) utilizes the derivative as an economic hedge ("non-designated derivative"). Changes in the fair value of a derivative that is highly effective and is designated and qualifies as a fair value hedge, along with the loss or gain on the
hedged asset attributable to the hedged risk, are recorded in current period operations as a component of net derivative loss. Changes in the fair value of non-designated derivatives are reported in current period operations as a component of net
derivative loss.

The Company issues equity-indexed annuity contracts that contain a derivative instrument that is "embedded" in the contract. Upon issuing the contract, the embedded derivative is separated from the host contract (annuity contract), is
carried at fair value, and is considered a non-designated derivative. The Company purchases call options and futures on the S&P 500 Index to economically hedge its obligation under the annuity contract to provide returns based upon this index. The
call options and futures are non-designated derivatives. In addition, the Company utilizes non-designated total return swap agreements to hedge its obligations related to certain separate account liabilities.

As a component of its investment strategy and to reduce its exposure to interest rate risk, the Company utilizes interest rate swap agreements. Interest rate swap agreements are agreements to exchange with a counterparty interest rate
payments of differing character (e.g., fixed-rate payments exchanged for variable-rate payments) based on an underlying principal balance (notional principal) to hedge against interest rate changes. The interest rate swap agreements are designated and
qualify as fair value hedges. The ineffective portion of the fair value hedges, net of related effects on deferred policy acquisition costs, resulted in a loss of $0.7 million for the quarter ended March 31, 2001.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedging transactions. This process includes linking all fair
value hedges to specific assets on the balance sheet. The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in
fair values. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively.

When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair value hedge, the derivative will continue to be carried on the balance sheet at its fair value and changes in
fair value will be reported in operations. The subsequent fair value changes in the hedged asset will no longer be reported in current period operations.

4. Net Change in Unrealized and Undistributed Gains in Private Equity Limited Partnerships

The net change in unrealized and undistributed gains in private equity limited partnerships is accounted for on the equity method and represents primarily increases in the fair value of the underlying investments of the private
equity limited partnerships for which the Company has ownership interests in excess of 3%. This change in unrealized and undistributed gains is recorded net of the related amortization of deferred policy acquisition costs of $4.9 million and $27.8
million, and net of the amounts realized, which are recognized in investment income of $8.9 million and $1.7 million, for the three-month periods ended March 31, 2001 and 2000, respectively. The financial information for these investments is obtained
directly from the private equity limited partnerships on a periodic basis. There can be no assurance that any unrealized and undistributed gains will ultimately be realized or that the Company will not incur losses in the future on such investments.
Partnership investments totaled $458.3 million and $439.0 million ($360.4 million and $348.7 million excluding the net change in unrealized and undistributed gains in private equity limited partnerships) at March 31, 2001 and December 31, 2000.

5. Comprehensive Income

Total comprehensive income, net of tax, for the three-month periods ended March 31, 2001 and 2000, was $8.2 million and $35.5 million, respectively.

6. Subsequent Event

On May 3, 2001, Liberty Financial Corporation (LFC), the Company's parent, announced that it had reached a definitive agreement to sell its annuity and bank marketing businesses to Sun Life Financial. Through this transaction, Sun
Life Financial will acquire Keyport Life Insurance Company and Independent Financial Marketing Group. Sun Life Financial will pay approximately $1.7 billion in cash for the two businesses.

The transaction is subject to customary conditions to closing, including receipt of approvals by various state insurance regulators in the U.S., certain other regulatory authorities in the U.S. and Canada and Liberty Financial's
shareholders. In connection with the execution of the definitive purchase agreement, Liberty Mutual Insurance Company, LFC's controlling stockholder, entered into an agreement to vote in favor of the Sun Life Financial transaction. The acquisition is
expected to close in the second half of 2001.

7. Reclassifications

Certain amounts in the prior year financials have been reclassified in order to conform to the current year presentation.

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

and Financial Condition

On November 1, 2000, Liberty Financial Corporation (LFC), the Company's parent, announced that it had retained the investment banking firm of Credit Suisse First Boston Corporation to review its strategic alternatives, including a
possible sale of the Company. On May 3, 2001, LFC announced that it had reached a definitive agreement to sell its annuity and bank marketing businesses to Sun Life Financial. Through this transaction, Sun Life Financial will acquire Keyport Life
Insurance Company and Independent Financial Marketing Group. Sun Life Financial will pay approximately $1.7 billion in cash for the two businesses.

The transaction is subject to customary conditions to closing, including receipt of approvals by various state insurance regulators in the U.S., certain other regulatory authorities in the U.S. and Canada and Liberty Financial's
shareholders. In connection with the execution of the definitive purchase agreement, Liberty Mutual Insurance Company, LFC's controlling stockholder, entered into an agreement to vote in favor of the Sun Life Financial transaction. The acquisition is
expected to close in the second half of 2001.

Results of Operations

Net (loss) incomewas ($23.9) million and $38.1 million for the three-month periods ended March 31, 2001 and 2000, respectively. Income from operations (income before cumulative effect of a change in accounting principle,
income taxes, net change in unrealized and undistributed gains in private equity limited partnerships, and net realized investment losses) was $49.9 million and $51.1 million for the three-month periods ended March 31, 2001 and 2000, respectively. The
decrease in income from operations is primarily attributable to net derivative losses of $3.8 million.

Change in Accounting Principle

The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an amendment of SFAS No. 133" on January 1, 2001. The Statement requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset by the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in operations.

The cumulative effect, reported after tax and net of related effects on deferred policy acquisition costs, upon adoption of the Statement at January 1, 2001 decreased net income and stockholder's equity by $54.3 million. The adoption
of the Statement may increase volatility in future reported income due, among other reasons, to the requirements of defining an effective hedging relationship under the Statement as opposed to certain hedges the Company believes are effective economic
hedges. The Company anticipates that it will continue to utilize its current risk management philosophy, which includes the use of derivative instruments.

Net derivative loss of $3.8 million for the three-month period ended March 31, 2001, represents fair value changes of non-designated derivatives and the ineffective portion of fair value hedges, net of related effects on
deferred policy acquisition costs.

All derivatives are recognized on the balance sheet at fair value. On the date the derivative contract is entered into, the Company designates the derivative as either (1) a hedge of the fair value of a recognized asset ("fair value
hedge") or (2) utilizes the derivative as an economic hedge ("non-designated derivative"). Changes in the fair value of a derivative that is highly effective and is designated and qualifies as a fair value hedge, along with the loss or gain on the hedged
asset attributable to the hedged risk, are recorded in current period operations as a component of net derivative loss. Changes in the fair value of non-designated derivatives are reported in current period operations as a component of net derivative loss.

The Company issues equity-indexed annuity contracts that contain a derivative instrument that is "embedded" in the contract. Upon issuing the contract, the embedded derivative is separated from the host contract (annuity contract), is
carried at fair value, and is considered a non-designated derivative. The Company purchases call options and futures on the S&P 500 Index to economically hedge its obligation under the annuity contract to provide returns based upon this index. The
call options and futures are non-designated derivatives. In addition, the Company utilizes non-designated total return swap agreements to hedge its obligations related to certain separate account liabilities. The net derivative gain (loss) related to
changes in the fair value of the "embedded" derivatives and call options and futures, net of related effects on deferred policy acquisition costs, for the three-month period ended March 31, 2001 was a gain of $30.6 million and a loss of $(33.7) million,
respectively.

As a component of its investment strategy and to reduce its exposure to interest rate risk, the Company utilizes interest rate swap agreements. Interest rate swap agreements are agreements to exchange with a counterparty interest rate
payments of differing character (e.g., fixed-rate payments exchanged for variable-rate payments) based on an underlying principal balance (notional principal) to hedge against interest rate changes. The interest rate swap agreements are designated and
qualify as fair value hedges. The ineffective portion of the fair value hedges, net of related effects on deferred policy acquisition costs, resulted in a loss of $0.7 million for the three-month period ended March 31, 2001.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedging transactions. This process includes linking all fair
value hedges to specific assets on the balance sheet. The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in
fair values. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively.

When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair value hedge, the derivative will continue to be carried on the balance sheet at its fair value and changes in value will be
reported in operations. The subsequent fair value changes in the hedged asset will no longer be reported in current period operations.

Investment spread is the amount by which investment income earned on the Company's investments exceeds interest credited to policyholder balances. Investment spread was $86.4 million and $77.4 million for the three-month periods
ended March 31, 2001 and 2000, respectively. The amount by which the average yield on investments exceeds the average interest credited rate on policyholder balances is the investment spread percentage. The investment spread percentage was 2.49% and 2.22%
for the three-month periods ended March 31, 2001 and 2000, respectively.

Investment income was $234.9 million and $204.7 million for the three-month periods ended March 31, 2001 and 2000, respectively. The increase of $30.2 million in 2001 compared to 2000 is the result of a higher average investment yield
($31.2 million) offset by a decrease in average invested assets ($1.0 million). The average investment yield was 7.43% and 6.45 % for the three-month periods March 31, 2001 and 2000, respectively. The adoption of FAS 133 requires that call options be
carried at fair value and the Company's call options are considered non-designated derivatives. The changes of the fair value of the call options are reported as a component of net derivative income (loss) in 2001. In the prior year, the premium paid for
a call option was amortized over its contract term and the call option amortization was included as a component of investment income. Investment income for the three-month periods ended March 31, 2000, included $21.1 million of S&P 500 Index call
option amortization expense related to the Company's equity-indexed annuities. If FAS 133 was not adopted, call option amortization expense and the average investment yield would have been $24.8 million and 6.60%, respectively, for the three-month period
ended March 31, 2001.

Interest credited to policyholders was $148.5 million and $127.3 million for the three-month periods ended March 31, 2001 and 2000, respectively. The increase of $21.2 million in 2001 compared to 2000 is the result of a higher average
interest credited rate ($21.5 million) offset by a slightly lower level of average policyholder balances ($.3 million). Policyholder balances averaged $12.02 billion in the first quarter of 2001 ($9.92 billion of fixed products, consisting of fixed
annuities and the closed block of single premium whole life insurance, and $2.1 billion of equity-indexed annuities) compared to $12.05 billion ($9.75 billion of fixed products and $2.3 billion of equity-indexed annuities) in the first quarter of 2000.
The average interest credited rate was 4.94% (5.23% on fixed products and 3.56 % on equity-indexed annuities) and 4.23% (5.01% on fixed products and .85% on equity-indexed annuities) for the three-month periods ended March 31, 2001 and 2000, respectively.
The Company's equity-indexed annuities credit interest to the policyholder at a "participation rate" equal to a portion (ranging for existing policies from 25% to 100%) of the change in value of the S&P 500 Index. The Company's equity-indexed
annuities also provide full guarantee of principal if held to term, plus interest at 0.85% annually.

Under FAS 133, the index annuities are deemed to contain an embedded derivative (the change in value attributable to the change in the S&P 500 index) and a host contract. The host contracts' interest rate is derived at the
inception of the contract and an effective interest rate is utilized that will result in a liability equal to the guaranteed minimum account value at the end of the term. The embedded derivative is a non-designated derivative and the changes in fair value
are reported as a component of derivative income (loss). In 2000, the interest credited to equity-indexed policyholders related to the participation rate is reflected net of income recognized on the S&P 500 Index call options and futures resulting in
a 0.85% net credited rate. If FAS 133 was not adopted, interest credited and the average interest credited rate would have been $140.7 million and 4.92% for the three-month period ended March 31, 2001, respectively.

Average investments (computed without giving effect to Statement of Financial Accounting Standards No. 115), including a portion of the Company's cash and cash equivalents, were $12.6 billion and $12.7 billion for the
three-month periods ended March 31, 2001 and 2000, respectively.

Net realized investment losses were $14.4 million and $7.7 million for the three-month periods ended March 31, 2001 and 2000, respectively. The net realized investment included losses of $18.4 million and $3.3 million for
certain fixed maturity investments where the decline in value was determined to be other than temporary for the three-month periods ended March 31, 2001 and 2000, respectively.

Net change in unrealized and undistributed gains in private equity limited partnerships is accounted for on the equity method and represents primarily increases in the fair value of the underlying investments of the private
equity limited partnerships for which the Company has ownership interests in excess of 3%. This change in unrealized and undistributed gains is recorded net of the related amortization of deferred policy acquisition costs of $4.9 million and $27.8
million, and net of the amounts realized, which are recognized in investment income of $8.9 million and $1.7 million, respectively, for the three-month periods ended March 31, 2001 and 2000, respectively. The financial information for these investments is
obtained directly from the private equity limited partnerships on a periodic basis. There can be no assurance that any unrealized and undistributed gains will ultimately be realized or that the Company will not incur losses in the future on such
investments.

Surrender charges are revenues earned on the early withdrawal of fixed, equity-indexed and variable annuity policyholder balances. Surrender charges on fixed, equity-indexed and variable annuity withdrawals generally are
assessed at declining rates applied to policyholder withdrawals during the first five to seven years of the contract. Total surrender charges were $3.7 million and $4.9 million for the three-month periods ended March 31, 2001 and 2000, respectively.

On an annualized basis, total annuity withdrawals represented 16.80% and 14.86% of the total average annuity policyholder and separate account balances for the three-month periods ended March 31, 2001 and 2000, respectively. The higher
level of surrenders are the result of increased competition from other investment products and policy-holders surrendering out of fixed annuities.

Separate account income is primarily mortality and expense charges earned on variable annuity and variable life policyholder balances. These charges, which are based on the market values of the assets in the separate accounts
supporting the contracts, were $12.8 million and $10.7 million for the three-month periods ended March 31, 2001 and 2000, respectively. Variable product fees represented 1.39% and 1.42% of the average variable annuity and variable life separate account
balances for the three-month periods ended March 31, 2001 and 2000, respectively. In addition, for certain separate institutional accounts the investment spread is included in separate account income.

Management fees are primarily investment advisory fees related to the separate account assets. The fees are based on the level of assets under management, which are affected by product sales, redemptions and changes in the fair
values of the investments managed. Management fees were $1.9 million and $1.2 million for the three-month periods ended March 31, 2001 and 2000, respectively. The increase of $0.7 million in 2001 compared to 2000 primarily relates to higher levelof average separate account assets. Average separate account assets were $4.1 billion and $3.4 billion for the three-month periods ended March 31, 2001 and 2000, respectively.

Operating expenses primarily represent compensation and general and administrative expenses. These expenses were $16.9 million and $14.5 million for the three-month periods ended March 31, 2001 and 2000, respectively. The
increase in 2001 compared to 2000 was primarily due to higher employee, information technology, and retention related expenses.

Amortization of deferred policy acquisition costs relates to the costs of acquiring new business, which vary with, and are primarily related to, the production of new annuity business. Such acquisition costs included
commissions, costs of policy issuance, underwriting and selling expenses.

Amortization was $32.7 million and $27.1 million for the three-month periods ended March 31, 2001 and 2000, respectively. The $5.6 million increase in amortization in 2001 compared to 2000 was primarily related to the increase in
investment spread from the growth of business in force associated with fixed and equity-indexed products. Amortization expense represented 33.0% and 30.7%, on an annualized basis, of investment spread and separate account fees for 2001 and 2000,
respectively.

Federal income tax expense was $7.8 million and $20.2 million, or 20.4% and 34.7% of pretax income, for the three-month periods ended March 31, 2001 and 2000, respectively. The decrease in the effective tax rate in 2001 compared
to 2000 primarily reflects a reduction of $5.9 million to the valuation allowance established for unrealized capital losses in the "available for sale" investment portfolio.

Financial Condition

Stockholder's equity was $1.288 billion as of March 31, 2001 compared to $1.280 billion as of December 31, 2000. The $8.2 million increase in stockholder's equity consists of a $32.1 million increase in net unrealized investment
gains on available for sale securities offset by a $23.9 million net loss for the period.

Investments (computed without giving effect to Statement of Financial Accounting Standards No. 115), including a portion of the Company's cash and cash equivalents, were $12.5 billion and $12.6 billion at March 31, 2001 and
December 31, 2000, respectively.

The Company's general investment policy is to hold fixed maturity investments for long-term investment and, accordingly, the Company does not have a trading portfolio. To provide for maximum portfolio flexibility and appropriate tax
planning, the Company classifies its bond portfolio as "available for sale" and carries such investments at fair value. Gross unrealized gains (losses) at March 31, 2001 and December 31, 2000 were $125.1 million and ($60.2) million, respectively.

Approximately $12.1 billion, or 78.6%, of the Company's general account and certain separate account investments at March 31, 2001, were rated by Standard & Poor's Corporation, Moody's Investors Service or under comparable
statutory rating guidelines established by the National Association of Insurance Commissioners (NAIC). At March 31, 2001, the carrying value of investments in below investment grade securities totaled $1.3 billion, or 8.6% of general account and certain
separate account investments of $15.4 billion. Below investment grade securities generally provide higher yields and involve greater risks than investment grade securities because their issuers typically are more highly leveraged and more vulnerable to
adverse economic conditions than investment grade issuers. In addition, the trading market for these securities may be more limited than for investment grade securities.

The Company routinely reviews its portfolio of investment securities. The Company identifies monthly any investments that require additional monitoring, and reviews the carrying value of such investments at least quarterly to determine
whether specific investments should be placed on a nonaccrual basis and to determine declines in value that may be other than temporary. In making these reviews, the Company principally considers the adequacy of collateral (if any), compliance with
contractual covenants, the borrower's recent financial performance, news reports, and other externally generated information concerning the borrower's affairs. In the case of publicly traded fixed maturity securities, management also considers market
value quotations if available. As of March 31, 2001 and December 31, 2000, the carrying value of fixed maturity securities that were non-income producing was $52.3 million and $24.4 million, respectively.

Derivatives

As a component of its investment strategy and to reduce its exposure to interest rate risk, the Company utilizes interest rate and total return swap agreements and interest rate cap agreements to match assets more closely to
liabilities. Interest rate swap agreements are agreements to exchange with counterparty interest rate payments of differing character (e.g., fixed-rate payments exchanged for variable-rate payments) based on an underlying principal balance (notional
principal) to hedge against interest rate changes. The Company currently utilizes interest rate swap agreements to reduce asset duration and to better match interest earned on longer-term fixed-rate assets with interest credited to policyholders, as well
as fair value changes attributable to interest rate risk. A total return swap agreement is an agreement to exchange payments based upon an underlying notional balance and changes in variable rate and total return indices. The Company utilizes total return
swap agreements to hedge its obligations related to certain separate account liabilities. The Company had 86 and 69 outstanding swap agreements as of March 31, 2001 and December 31, 2000 with an aggregate notional principal amount of $3.2 billion and $3.8
billion, respectively.

Cap agreements are agreements with a counterparty that require the payment of a premium for the right to receive payments for the difference between the cap interest rate and a market interest rate on specified future dates based on an
underlying notional principal to hedge against rising interest rates. There were no outstanding interest rate cap agreements as of March 31, 2001 and December 31, 2001.

With respect to the Company's equity-indexed annuities and certain separate account liabilities, the Company buys call options, futures and certain total return swap agreements on the S&P 500 Index to economically hedge its
obligations to provide returns based upon this index. The Company had call options with a carrying value of $134.7 million and $337.7 million as of March 31, 2001 and December 31, 2000, respectively. The Company had total return swap agreements with a
carrying value of $12.7 million and $23.9 million as of March 31, 2001 and December 31, 2000, respectively.

There are risks associated with some of the techniques the Company uses to match its assets and liabilities. The primary risk associated with swap, cap and call option agreements is counterparty nonperformance. The Company believes
that the counterparties to its swap, cap and call option agreements are financially responsible and that the counterparty risk associated with these transactions is minimal. Future contracts trade on organized exchanges and, therefore, have minimal credit
risk. In addition, swap and cap agreements have interest rate risk and call options, futures and certain total return swap agreements have stock market risk. These swap and cap agreements hedge fixed-rate assets and the Company expects that any interest
rate movements that adversely affect the market value of swap agreements would be offset by changes in the market values of such fixed-rate assets. However, there can be no assurance that these hedges will be effective in offsetting the potential adverse
effects of changes in interest rates. Similarly, the call options, futures and certain total return swap agreements economically hedge the Company's obligations to provide returns on equity-indexed annuities based upon the S&P 500 Index, and the
Company believes that any stock market movements that adversely affect the market value of S&P 500 Index call options, futures and certain total return swap agreements would be substantially offset by a reduction in policyholder liabilities. However,
there can be no assurance that these hedges will be effective in offsetting the potentially adverse effects of changes in S&P 500 Index levels. The Company's profitability could be adversely affected if the value of its swap and cap agreements
increase less than (or decrease more than) the change in the market value of its fixed rate assets and/or if the value of its S&P Index 500 call options, futures and certain total return swap agreements increase less than (or decrease more than) the
value of the guarantees made to equity-indexed policyholders.

Liquidity

The Company's liquidity needs and financial resources pertain to the management of the general account assets and policyholder balances. The Company uses cash for the payment of annuity and life insurance benefits, operating
expenses, policy acquisition costs, and the purchase of investments. The Company generates cash from annuity premiums and deposits, net investment income, and from maturities and sales of its investments. Annuity premiums, maturing investments and net
investment income have historically been sufficient to meet the Company's cash requirements. The Company monitors cash and cash equivalents in an effort to maintain sufficient liquidity and has strategies in place to maintain sufficient liquidity in
changing interest rate environments. Consistent with the nature of its obligations, the Company has invested a substantial amount of its general account assets in readily marketable securities. At March 31, 2001, $12.4 billion, or 80.4%, of the Company's
general account and certain separate account investments are considered readily marketable.

To the extent that unanticipated surrenders cause the Company to sell for liquidity purposes a material amount of securities prior to their maturity, such surrenders could have a material adverse effect on the Company. Although no
assurance can be given, the Company believes that liquidity to fund withdrawals would be available through incoming cash flow, the sale of short-term or floating-rate instruments, thereby precluding the sale of fixed maturity investments in a potentially
unfavorable market.

Current Rhode Island insurance law permits the payment of dividends or distributions from the Company to Liberty Financial, which, together with dividends and distributions paid during the preceding 12 months, do not exceed the lesser
of (i) 10% of statutory surplus as of the preceding December 31 or (ii) the net gain from operations for the preceding fiscal year. Any proposed dividend in excess of this amount is called an "extraordinary dividend" and may not be paid until it is
approved by the Commissioner of Insurance of the State of Rhode Island. As of March 31, 2001 the amount of additional dividends that the Company could pay without such approval was $28.4 million.

Based upon the historical cash flow of the Company, the Company's current financial condition and the Company's expectation that there will not be a material adverse change in the results of operations of the Company and its
subsidiaries during the next twelve months, the Company believes that cash flow provided by operating activities over this period will provide sufficient liquidity for the Company to meet its liquidity needs.

Effects of Inflation

Inflation has not had a material effect on the Company's consolidated results of operations to date. The Company manages its investment portfolio in part to reduce its exposure to interest rate fluctuations. In general, the fair
value of the Company's fixed maturity portfolio increases or decreases in inverse relationship with fluctuations in interest rates, and the Company's net investment income increases or decreases in direct relationship with interest rate changes. For
example, if interest rates decline the Company's fixed maturity investments generally will increase in fair value, while net investment income will decrease as fixed maturity investments mature or are sold and the proceeds are reinvested at reduced rates.
However, inflation may result in increased operating expenses that may not be readily recoverable in the prices of the services charged by the Company.

Item 3. Quantitative and Qualitative Disclosure of Market Risk

There have not been any material changes during the three-month period ended March 31, 2001 in the market risks the Company is exposed to and management of such risks, which are summarized in our 2000 Form 10-K.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

None

(b) Reports on Form 8-K

On May 4, 2001, the Company filed a Current Report on form 8-K pursuant to which the Company stated that Liberty Financial Companies, Inc., a Massachusetts corporation ("LFC"), the Company's corporate parent, and Liberty Financial Services, Inc.,
a Massachusetts corporation and a wholly owned subsidiary of LFC ("LFS"), entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") with Sun Life Assurance Company of Canada, a Canadian insurance corporation ("Sun Life"). Pursuant to the
Stock Purchase Agreement, LFC and LFS agreed to sell, and Sun Life agreed to purchase (the "Sale"), all of the issued and outstanding shares of capital stock of certain direct and indirect subsidiaries of LFC and LFS constituting LFC's annuity and bank
marketing businesses which include the Company for an aggregate purchase price of approximately $1.7 billion. The Sale is subject to customary conditions to closing, including without limitation receipt of approvals by various state insurance regulators
in the U.S., certain regulatory authorities in the U.S. and Canada and LFC's shareholders. In connection with the execution of the Stock Purchase Agreement, Liberty Mutual Insurance Company, LFC's controlling stockholder, entered into an agreement to vote
in favor of the Sale.







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.





| | KEYPORT LIFE INSURANCE COMPANY
| | ------------------------------
| |                               
| | /s/ Bernhard M. Koch          
| |                               
| | Bernhard M. Koch              
| | Senior Vice President and     
| | Chief Financial Officer       
| | (Principal Financial Officer) 





Date: May 14, 2001