SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[ X ]  QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d) OF THE  SECURITIES
EXCHANGE ACT OF 1934
                  For the quarterly period ended September 30, 1999
                                                 ------------------

                                       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 number: 1-13654
                                                -------

                       LIBERTY FINANCIAL COMPANIES, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)



       Massachusetts                                     04-3260640
--------------------------------------------------------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)



600 Atlantic Avenue, Boston, Massachusetts                          02210-2214
--------------------------------------------------------------------------------
(Address of principal executive offices)                            (Zip Code)

                                 (617) 722-6000
--------------------------------------------------------------------------------
              (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  47,279,457  shares of the  registrant's  Common  Stock,  $.01 par
value,  and 324,759 shares of the  registrant's  Series A Convertible  Preferred
Stock, $.01 par value, outstanding as of October 31, 1999.

Exhibit Index - Page 23                                             Page 1 of 25

<PAGE>

                       LIBERTY FINANCIAL COMPANIES, INC.
       QUARTERLY REPORT ON FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 1999


                               TABLE OF CONTENTS


Part I.     FINANCIAL INFORMATION                                       Page


Item 1.     Financial Statements

            Consolidated Balance Sheets as of September 30, 1999 and
              December 31, 1998

            Consolidated Income Statements for the Three Months and
              Nine Months Ended September 30, 1999 and 1998

            Consolidated Statements of Cash Flows for the Nine Months
              Ended September 30, 1999 and 1998

            Consolidated Statement of Stockholders' Equity for the
              Nine Months Ended September 30, 1999

            Notes to Consolidated Financial Statements

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

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

Part II.    OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K

Signatures

Exhibit Index

<PAGE>

                       LIBERTY FINANCIAL COMPANIES, INC.
                          CONSOLIDATED BALANCE SHEETS
                                 (in millions)


                                                   September 30     December 31
                                                       1999            1998
                                                   -------------   -------------
                                                     Unaudited
                                     ASSETS

Assets:
   Investments                                   $  12,215.5       $  12,598.3
   Cash and cash equivalents                         1,258.9             984.1
   Accrued investment income                           176.2             161.0
   Deferred policy acquisition costs                   647.4             407.6
   Deferred distribution costs                         153.9             130.2
   Intangible assets                                   287.2             292.8
   Other assets                                        258.3             179.6
   Separate account assets                           2,849.6           1,765.5
                                                   ----------        ----------
                                                 $  17,847.0       $  16,519.1
                                                   ==========        ==========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Policyholder balances                         $  12,075.6       $  12,504.1
   Notes payable                                       536.9             486.4
   Payable for investments purchased
     and loaned                                        835.5             240.4
   Other liabilities                                   321.6             278.4
   Separate account liabilities                      2,790.4           1,723.2
                                                   ----------        ----------
      Total liabilities                             16,560.0          15,232.5
                                                   ----------        ----------


Series A redeemable convertible preferred
 stock, par value $.01; authorized, issued
 and outstanding 324,759 shares in 1999 and
 1998                                                   15.8              15.3
                                                   ----------        ----------

Stockholders' Equity:
 Common stock, par value $.01; authorized
  100,000,000 shares, issued and outstanding
  47,262,707 shares in 1999 and 46,384,015
  shares in 1998                                         0.5               0.5
 Additional paid-in capital                            918.8             901.5
 Retained earnings                                     406.3             346.4
 Accumulated other comprehensive income (loss)         (49.3)             27.2
 Unearned compensation                                  (5.1)             (4.3)
                                                   ----------        ----------
      Total stockholders' equity                     1,271.2           1,271.3
                                                   ----------        ----------
                                                 $  17,847.0       $  16,519.1
                                                   ==========        ==========

          See accompanying notes to consolidated financial statements.

<PAGE>

                       LIBERTY FINANCIAL COMPANIES, INC.
                         CONSOLIDATED INCOME STATEMENTS
                      (in millions, except per share data)
                                   Unaudited

                                     Three Months Ended      Nine Months Ended
                                         September 30           September 30
                                     --------------------   --------------------
                                         1999       1998        1999       1998
                                     ---------  ---------   ---------  ---------

Investment income                     $ 197.9    $ 202.7     $ 601.2    $ 612.4
Interest credited to policyholders     (131.3)    (143.3)     (395.5)    (425.6)
                                     ---------  ---------   ---------  ---------
Investment spread                        66.6       59.4       205.7      186.8
                                     ---------  ---------   ---------  ---------
Net realized investment gains
 (losses)                               (12.7)       4.2       (27.4)       4.0
                                     ---------  ---------   ---------  ---------
Fee income:
 Investment advisory and
  administrative fees                    68.2       58.4       202.6      174.5
 Distribution and service fees           15.3       13.2        45.3       39.0
 Transfer agency fees                    13.1       11.9        38.8       36.6
 Surrender charges and net
  commissions                             9.6        8.2        27.0       26.2
 Separate account fees                    8.7        5.4        23.0       15.5
                                     ---------  ---------   ---------  ---------
Total fee income                        114.9       97.1       336.7      291.8
                                     ---------  ---------   ---------  ---------
Expenses:
 Operating expenses                     (89.1)     (78.5)     (268.3)    (238.5)
 Amortization of deferred policy
  acquisition costs                     (22.8)     (16.7)      (69.5)     (56.7)
 Amortization of deferred
  distribution costs                    (10.2)      (9.8)      (29.4)     (27.9)
 Amortization of intangible assets       (5.0)      (3.6)      (15.1)     (10.7)
 Interest expense, net                   (4.6)      (2.7)      (15.6)     (10.5)
                                     ---------  ---------   ---------  ---------
Total expenses                         (131.7)    (111.3)     (397.9)    (344.3)
                                     ---------  ---------   ---------  ---------

Pre-tax income                           37.1       49.4       117.1      138.3
Income tax expense                      (12.5)     (15.9)      (41.8)     (43.6)
                                     ---------  ---------   ---------  ---------
Net income                             $ 24.6     $ 33.5      $ 75.3     $ 94.7
                                     =========  =========   =========  =========
Net income per share - basic           $  0.52    $  0.73     $  1.60    $  2.08
                                     =========  =========   =========  =========
Net income per share - assuming
 dilution                              $  0.51    $  0.71     $  1.57    $  2.00
                                     =========  =========   =========  =========

                See accompanying notes to consolidated financial statements.
<PAGE>

                        LIBERTY FINANCIAL COMPANIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (in millions)
                                    Unaudited

                                                            Nine Months Ended
                                                               September 30
                                                           ---------------------
                                                               1999        1998
                                                           ---------   ---------

Cash flows from operating activities:
Net income                                                   $ 75.3      $ 94.7
Adjustments to reconcile net income to net cash
 provided by operating activities:
   Depreciation and amortization                               56.8        54.3
   Interest credited to policyholders                         395.5       425.6
   Net realized investment losses (gains)                      27.4        (4.0)
   Net amortization on investments                             61.6       101.9
   Change in deferred policy acquisition  costs               (13.4)      (25.8)
   Net change in other assets and liabilities                 (57.8)      (26.1)
                                                           ---------   ---------
      Net cash provided by operating activities               545.4       620.6
                                                           ---------   ---------
Cash flows from investing activities:
   Investments purchased available for sale                (4,032.8)   (5,207.4)
   Investments sold available for sale                      3,903.7     4,060.6
   Investments matured available for sale                     110.8       938.2
   Change in policy loans, net                                (10.9)      (24.8)
   Change in mortgage loans, net                               42.1         4.3
   Acquisitions, net of cash acquired                           0.0       (96.4)
   Other                                                       (7.0)       11.3
                                                           ---------   ---------
     Net cash provided by (used in) investing activities        5.9      (314.2)
                                                           ---------   ---------
Cash flows from financing activities:
   Withdrawals from policyholder accounts                  (1,570.8)   (1,371.6)
   Deposits to policyholder accounts                          640.4     1,089.3
   Securities lending                                         603.1       (25.0)
   Change in notes payable                                     50.5        97.0
   Exercise of stock options                                    5.0         5.8
   Dividends paid                                              (4.7)       (4.4)
                                                           ---------   ---------
     Net cash used in financing activities                   (276.5)     (208.9)
                                                           ---------   ---------
   Increase in cash and cash equivalents                      274.8        97.5
   Cash and cash equivalents at beginning of period           984.1     1,290.1
                                                           ---------   ---------
   Cash and cash equivalents at end of period             $ 1,258.9   $ 1,387.6
                                                           =========   =========

          See accompanying notes to consolidated financial statements.


<PAGE>
                       LIBERTY FINANCIAL COMPANIES, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 (in millions)
                                   Unaudited

                                                  Accum.
                                                  Other
                             Addit'l            Comprehen.             Total
                    Common   Paid-In  Retained    Income   Unearned  Stockhldrs'
                     Stock   Capital  Earnings    (Loss)    Compen.    Equity
                    -------  -------  --------  ---------- --------- ----------

Balance,
 December 31,
 1998                 $0.5   $901.5    $346.4       $27.2     $(4.3)  $1,271.3
Effect of
 stock-based
 compensation
 plans                          7.2                            (0.8)       6.4
Accretion to face
 value of preferred
 stock                                   (0.6)                            (0.6)
Common stock
 dividends                     10.1     (14.1)                            (4.0)
Preferred stock
 dividends                               (0.7)                            (0.7)
Net income                               75.3                             75.3
Other comprehensive
 income (loss),
 net of tax                                         (76.5)               (76.5)
                    -------  -------  --------  ---------- --------- ----------
Balance,
 September 30,
 1999                 $0.5   $918.8    $406.3      $(49.3)    $(5.1)  $1,271.2
                    =======  =======  ========  ========== ========= ==========

                See accompanying notes to consolidated financial statements.
<PAGE>

                       LIBERTY FINANCIAL COMPANIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   Unaudited

1.    General

       The accompanying  unaudited consolidated financial statements include all
   adjustments,   consisting  of  normal  recurring  accruals,  that  management
   considers  necessary  for a  fair  presentation  of the  Company's  financial
   position  and  results  of  operations  as of and  for  the  interim  periods
   presented.  Certain  footnote  disclosures  normally  included  in  financial
   statements   prepared  in  accordance  with  generally  accepted   accounting
   principles  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 1998
   Form 10-K.  The results of  operations  for the three  months and nine months
   ended September 30, 1999 are not necessarily  indicative of the results to be
   expected for the full year.  Certain  previously  reported  amounts have been
   reclassified to conform with the current period presentation.

2.    Segment Information

      The  Company is an asset  accumulation  and  management  company  with two
   reportable segments:  retirement-oriented  insurance (principally  annuities)
   and asset management.  The annuity insurance business is conducted at Keyport
   Life Insurance  Company  ("Keyport").  Keyport  generates  investment  spread
   income from the investment  portfolio  which supports  policyholder  balances
   associated with its fixed and indexed  annuity  business and its closed block
   of single premium whole life insurance.  The annuity insurance  business also
   derives fee income from the  administration  of fixed,  indexed and  variable
   annuity  contracts.  The asset  management  business is  conducted at Liberty
   Funds  Group,  an  investment   advisor  (through  its  subsidiary   Colonial
   Management Associates), distributor and transfer agent to mutual funds, Stein
   Roe & Farnham Incorporated, a diversified investment advisor, Newport Pacific
   Management,  Inc.,  an investment  advisor to mutual funds and  institutional
   accounts  specializing  in Asian equity  markets,  Crabbe  Huson Group,  Inc.
   ("Crabbe  Huson"),  an investment  advisor to mutual funds and  institutional
   accounts, Progress Investment Management Company ("Progress"),  an investment
   advisor to institutional  accounts,  and Liberty Asset Management Company, an
   investment advisor to mutual funds. The asset management business derives fee
   income from investment products and services.

      The Company's  reportable  segments offer different  products and are each
   managed  separately.  Information  by  reportable  segment is shown below (in
   millions):

                                         Three Months Ended   Nine Months Ended
                                            September 30        September 30
                                         -------------------  ------------------
                                            1999       1998      1999      1998
                                         --------   --------  --------  --------
 Statement of Operations Data
 Revenues (excluding net realized
  investment gains and losses):
   Annuity:
     Unaffiliated                         $215.5     $214.6    $648.6    $649.8
     Intersegment                           (3.5)      (2.3)    (10.3)     (7.5)
                                         --------   --------  --------  --------
     Total annuity                         212.0      212.3     638.3     642.3
                                         --------   --------  --------  --------
   Asset management:
     Unaffiliated                           97.3       85.2     289.3     254.4
     Intersegment                            3.5        2.3      10.3       7.5
                                         --------   --------  --------  --------
     Total asset management                100.8       87.5     299.6     261.9
                                         --------   --------  --------  --------
     Total revenues (excluding net
      realized investment gains
      and losses)                         $312.8     $299.8    $937.9    $904.2
                                         ========   ========  ========  ========

<PAGE>

                                       Three Months Ended    Nine Months Ended
                                          September 30          September 30
                                       ------------------    ------------------
                                          1999      1998        1999      1998
                                       --------  --------    --------  --------
Income before income taxes:
 Annuity:
  Income before amortization
   of intangible assets                  $43.0     $39.1      $127.9    $114.2
  Amortization of intangible assets       (0.3)     (0.3)       (0.9)     (0.9)
                                       --------  --------    --------  --------
   Subtotal annuity                       42.7      38.8       127.0     113.3
                                       --------  --------    --------  --------
 Asset management:
  Income before amortization
   of intangible assets                   22.7      17.1        65.9      59.9
  Amortization of intangible assets       (4.6)     (3.2)      (14.0)     (9.6)
                                       --------  --------    --------  --------
   Subtotal asset management              18.1      13.9        51.9      50.3
                                       --------  --------    --------  --------
 Other:
  Loss before amortization of
   intangible assets                     (10.9)     (7.4)      (34.2)    (29.1)
  Amortization of intangible assets       (0.1)     (0.1)       (0.2)     (0.2)
                                       --------  --------    --------  --------
   Subtotal other                        (11.0)     (7.5)      (34.4)    (29.3)
                                       --------  --------    --------  --------
 Income before net realized
  investment gains (losses)
  and income taxes                        49.8      45.2       144.5     134.3
 Net realized investment gains
 (losses)                                (12.7)      4.2       (27.4)      4.0
                                       --------  --------    --------  --------
  Total income before income taxes       $37.1     $49.4      $117.1    $138.3
                                       ========  ========    ========  ========

3.    Investments

      Investments were comprised of the following (in millions):

                                             September 30    December 31
                                                 1999           1998
                                             -----------   ------------

Fixed maturities                              $10,755.5      $11,277.2
Equity securities                                  25.8           24.6
Policy loans                                      589.6          578.9
Other invested assets                             844.6          717.6
                                             -----------   ------------
    Total                                     $12,215.5      $12,598.3
                                             ===========   ============

      The  Company's  general  investment  policy  is  to  hold  fixed  maturity
   securities 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 entire  portfolio of
   fixed  maturity  securities as "available for sale" and  accordingly  carries
   such investments at fair value.


<PAGE>

4.    Net Income Per Share

      The  following  table  sets  forth  the  computation  of  net  income  per
   share-basic and net income per share-assuming dilution:

                                      Three Months Ended      Nine Months Ended
                                         September 30            September 30
                                  ----------------------  ----------------------
                                       1999        1998        1999        1998
                                  ----------  ----------  ----------  ----------
Numerator (in millions)
 Net income                           $24.6       $33.5       $75.3       $94.7
 Less: preferred stock dividends       (0.2)       (0.2)       (0.7)       (0.7)
                                  ----------  ----------  ----------  ----------
Numerator for net income per
 share - basic - income available
 to common stockholders                24.4        33.3        74.6        94.0
Plus: income impact of assumed
 conversions Preferred stock
 dividends                              0.2         0.2         0.7         0.7
                                  ----------  ----------  ----------  ----------
Numerator for net income per
 share - assuming dilution -
 income available to common
 stockholders after assumed
 conversions                          $24.6       $33.5       $75.3       $94.7
Denominator
 Denominator for net income per
  share - basic - weighted
  average shares                 46,867,054  45,440,311  46,599,909  45,110,661
Effect of dilutive securities:
 Employee stock options             727,461   1,339,023     686,173   1,651,337
 Convertible preferred stock        514,370     514,493     514,368     516,090
 Common stock issuable as
  contingent purchase price          55,486           0      35,222           0
                                  ----------  ----------  ----------  ----------
Dilutive potential common shares  1,297,317   1,853,516   1,235,763   2,167,427
                                  ----------  ----------  ----------  ----------
   Denominator for net income
    per share - assuming
    dilution                     48,164,371  47,293,827  47,835,672  47,278,088
                                  ==========  ==========  ==========  ==========
Net income per share - basic          $0.52       $0.73       $1.60       $2.08
                                  ==========  ==========  ==========  ==========
Net income per share - assuming       $0.51       $0.71       $1.57       $2.00
 dilution                         ==========  ==========  ==========  ==========


5.   Comprehensive Income (Loss)

     Comprehensive income (loss) was comprised of the following (in millions):

                                       Three Months Ended    Nine Months Ended
                                          September 30          September 30
                                       ------------------    ------------------
                                           1999     1998         1999     1998
                                       --------- --------    --------- --------
Net income                                $24.6     $33.5       $75.3    $94.7
Other comprehensive loss, net of tax:
 Change in net unrealized investment
  losses                                  (30.0)    (30.8)      (76.5)   (28.3)
                                       --------- --------    --------- --------
Comprehensive income (loss)               $(5.4)     $2.7       $(1.2)   $66.4
                                       ========= ========    ========= ========

<PAGE>


6.    Recent Accounting Pronouncement

      In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133
   "Accounting for Derivative  Instruments  and Hedging  Activities" was issued.
   This statement standardizes the accounting for derivative instruments and the
   derivative   portion   of  certain   other   contracts   that  have   similar
   characteristics  by requiring that an entity  recognize those  instruments at
   fair value.  This  statement  also  requires a new method of  accounting  for
   hedging transactions,  prescribes the type of items and transactions that may
   be hedged,  and  specifies  detailed  criteria to be met to qualify for hedge
   accounting. In June 1999, SFAS No. 137 "Accounting for Derivative Instruments
   and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
   133" was issued.  SFAS No. 137 defers for one year the effective date of SFAS
   No. 133. This  statement now will apply to all fiscal  quarters of all fiscal
   years  beginning  after June 15, 2000.  Earlier  adoption is permitted.  Upon
   adoption,  the  Company  will be  required  to  record  a  cumulative  effect
   adjustment to reflect this accounting  change.  At this time, the Company has
   not completed its analysis and evaluation of the  requirements and the impact
   of this statement.

<PAGE>

Item 2.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
RESULTS OF OPERATIONS

Results of Operations

   Net  Income  was $24.6  million  or $0.51 per  share  for the  quarter  ended
September  30, 1999 compared to $33.5 million or $0.71 per share for the quarter
ended  September  30,  1998.  For the first nine months of 1999,  net income was
$75.3  million or $1.57 per share  compared to $94.7  million or $2.00 per share
for the first nine months of 1998.  These  decreases  resulted  largely from net
realized  investment losses in 1999 compared to net realized investment gains in
1998.  Operating expenses,  amortization  expense and interest expense, net also
increased.  Partially  offsetting these items were higher  investment spread and
fee income. Income tax expense decreased for 1999 compared to 1998. However, the
effective tax rate was significantly higher in 1999 compared to 1998.

   Pre-tax  Income was $37.1  million for the quarter  ended  September 30, 1999
compared to $49.4  million for the quarter  ended  September  30, 1998.  For the
first nine months of 1999,  pre-tax income was $117.1 million compared to $138.3
million for the first nine months of 1998. These decreases resulted largely from
net realized investment losses in 1999 compared to net realized investment gains
in 1998. Operating expenses, amortization expense and interest expense, net also
increased.  Partially  offsetting these items were higher  investment spread and
fee income.

   Investment  Spread is the  amount by which  investment  income  earned on the
Company's  investments  exceeds  interest  credited  on  policyholder  balances.
Investment  spread was $66.6  million for the quarter  ended  September 30, 1999
compared to $59.4 million for the quarter ended  September 30, 1998.  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 for the quarter ended September 30, 1999 was 1.90%
compared to 1.63% for the quarter ended  September 30, 1998.  For the first nine
months of 1999,  investment spread was $205.7 million compared to $186.8 million
for the first nine months of 1998.  The investment  spread  percentage was 1.93%
for the first nine months of 1999 compared to 1.76% for the first nine months of
1998.

   Investment income was $197.9 million for the quarter ended September 30, 1999
compared  to $202.7  million for the  quarter  ended  September  30,  1998.  The
decrease  of $4.8  million in 1999  compared  to 1998  includes  a $2.5  million
decrease  resulting  from a lower  average  investment  yield and a $2.3 million
decrease  as a result of a lower  level of  average  invested  assets.  The 1999
investment  income  was net of  $19.8  million  of S&P  500  Index  call  option
amortization expense related to the Company's  equity-indexed annuities compared
to $17.9 million in 1998. The average investment yield was 6.20% for the quarter
ended  September 30, 1999 compared to 6.27% for the quarter ended  September 30,
1998.  For the first nine months of 1999,  investment  income was $601.2 million
compared to $612.4  million for the first nine months of 1998.  The  decrease of
$11.2  million in 1999  compared to 1998  primarily  relates to a $20.2  million
decrease resulting from a lower average investment yield,  partially offset by a
$9.0 million  increase as a result of a higher level of average invested assets.
The 1999 investment income was net of $58.6 million of S&P 500 Index call option
amortization expense related to the Company's  equity-indexed annuities compared
to $53.1 million in 1998. The average  investment  yield was 6.20% for the first
nine months of 1999 compared to 6.41% for the first nine months of 1998.

   Interest  credited to  policyholders  totaled  $131.3 million for the quarter
ended  September  30,  1999  compared to $143.3  million  for the quarter  ended
September  30,  1998.  The  decrease of $12.0  million in 1999  compared to 1998
primarily  relates to a $10.5 million  decrease  resulting  from a lower average
interest  credited  rate,  as well as a $1.5  million  decrease as a result of a
lower level of average  policyholder  balances.  Policyholder  balances averaged
$12.2 billion  (including  $10.0 billion of fixed products,  consisting of fixed
annuities and the closed block of single premium whole life insurance,  and $2.2
billion of  equity-indexed  annuities) for the quarter ended  September 30, 1999
compared to $12.4 billion  (including  $10.6 billion of fixed  products and $1.8
billion of  equity-indexed  annuities) for the quarter ended September 30, 1998.
The average interest  credited rate was 4.30% (5.00% on fixed products and 0.85%
on  equity-indexed  annuities) for the quarter ended September 30, 1999 compared
to 4.64% (5.31% on fixed products and 0.85% on equity-indexed annuities) for the
quarter ended  September 30, 1998.  Keyport's  equity-indexed  annuities  credit
interest  to the  policyholder  at a  "participation  rate"  equal to a  portion
(ranging  for existing  policies  from 40% to 95%) of the change in value of the
S&P 500 Index. Keyport's  equity-indexed annuities also provide a full guarantee
of principal if held to term, plus interest at 0.85%  annually.  For each of the
periods presented, the interest credited to equity-indexed policyholders related
to the participation  rate was offset by investment income recognized on the S&P
500 Index call options  resulting in a 0.85% net  credited  rate.  For the first
nine months of 1999,  interest credited to policyholders  totaled $395.5 million
compared to $425.6  million for the first nine months of 1998.  The  decrease of
$30.1  million in 1999  compared to 1998  primarily  relates to a $34.8  million
decrease resulting from a lower average interest credited rate, partially offset
by a $4.7 million increase as a result of a higher level of average policyholder
balances.  Policyholder balances averaged $12.3 billion (including $10.2 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) for
the first nine months of 1999 compared to $12.2 billion (including $10.5 billion
of fixed  products and $1.7 billion of  equity-indexed  annuities) for the first
nine months of 1998.  The average  interest  credited  rate was 4.27%  (5.00% on
fixed products and 0.85% on equity-indexed  annuities) for the first nine months
of 1999 compared to 4.65% (5.31% on fixed  products and 0.85% on  equity-indexed
annuities) for the first nine months of 1998.

   Average investments in the Company's general account (computed without giving
effect to Statement  of Financial  Accounting  Standards  No. 115),  including a
portion of the Company's cash and cash  equivalents,  were $12.8 billion for the
quarter ended September 30, 1999 compared to $12.9 billion for the quarter ended
September 30, 1998. For the first nine months of 1999, such average  investments
were $12.9 billion  compared to $12.7 billion for the first nine months of 1998.
This increase was primarily due to the  reinvestment  of portfolio  earnings for
the twelve months ended September 30, 1999.

   Net Realized  Investment  Gains (Losses) were $(12.7) million for the quarter
ended  September  30,  1999  compared  to $4.2  million  for the  quarter  ended
September 30, 1998. For the first nine months of 1999,  net realized  investment
gains (losses) were $(27.4) million  compared to $4.0 million for the first nine
months of 1998. The net realized  investment  losses in 1999 included  losses of
$(5.7)  million  for the  quarter  and $(8.7)  million  for the nine  months for
certain fixed maturity  investments where the decline in value was determined to
be other than temporary.

   Investment  Advisory and Administrative Fees are based on the market value of
assets managed for mutual funds,  private capital  management and  institutional
investors.  Investment  advisory and administrative  fees were $68.2 million for
the quarter  ended  September 30, 1999 compared to $58.4 million for the quarter
ended September 30, 1998. For the first nine months of 1999, investment advisory
and  administrative  fees were $202.6 million compared to $174.5 million for the
first  nine  months  of 1998.  These  increases  during  1999  compared  to 1998
primarily reflect a higher level of average fee-based assets under management.

   Average  fee-based assets under management were $48.6 billion for the quarter
ended  September  30,  1999  compared to $40.7  billion  for the  quarter  ended
September 30, 1998. For the first nine months of 1999,  average fee-based assets
under management were $48.0 billion compared to $40.2 billion for the first nine
months of 1998.  These  increases  during 1999  compared to 1998  resulted  from
market  appreciation  and net sales for the twelve  months ended  September  30,
1999.  Investment  advisory  and  administrative  fees  were  0.56% and 0.57% of
average  fee-based  assets under management for the quarters ended September 30,
1999 and 1998,  respectively.  For the first nine months of 1999 and 1998,  such
percentages were 0.56% and 0.58%, respectively.

   The amount of fee-based  assets under management is affected by product sales
and  redemptions  and by  changes  in the  market  values of such  assets  under
management. Fee-based assets under management and changes in such assets are set
forth in the tables below (in billions).

<PAGE>

Fee-Based Assets Under Management

                                                     As of September 30
                                                    ---------------------
                                                      1999        1998
                                                    ---------   ---------
  Mutual Funds:
        Intermediary-distributed                      $17.5       $16.7
        Direct-marketed                                 6.1         6.5
        Closed-end                                      2.5         2.2
        Variable annuity                                1.8         1.2
                                                    ---------   ---------
                                                       27.9        26.6
  Private Capital Management                            8.2         7.0
  Institutional                                        11.9        10.7
                                                    ---------   ---------
        Total Fee-Based Assets Under Management*      $48.0       $44.3
                                                    =========   =========
--------------
*  As of  September  30,  1999 and  1998,  Keyport's  insurance  assets of $13.4
   billion and $13.2 billion, respectively,  bring total assets under management
   to $61.4 billion and $57.5 billion, respectively.

 Changes in Fee-Based Assets Under Management

                                       Three Months Ended    Nine Months Ended
                                           September 30        September 30
                                       -------------------   -------------------
                                           1999      1998        1999      1998
                                       --------- ---------   --------- ---------
 Fee-based  assets under management       $49.1     $41.0       $47.9     $38.7
 - beginning
 Sales and reinvestments                    3.2       2.1         9.0       6.2
 Redemptions and withdrawals               (2.5)     (1.6)       (8.3)     (4.7)
 Acquisitions                               0.0       5.4         0.0       5.4
 Market appreciation (depreciation)        (1.8)     (2.6)       (0.6)     (1.3)
                                       --------- ---------   --------- ---------
 Fee-based assets under management        $48.0     $44.3       $48.0     $44.3
 - ending                             ========== =========  ========== =========

   Distribution  and Service Fees are based on the market value of the Company's
intermediary-distributed  mutual funds. Distribution fees of 0.75% are generally
earned  on the  average  assets  attributable  to such  funds  sold  with  12b-1
distribution  fees and  contingent  deferred  sales  charges and service fees of
0.25% (net of amounts passed on to selling  brokers) are generally earned on the
total of such average  mutual fund assets.  These fees totaled $15.3 million for
the quarter  ended  September 30, 1999 compared to $13.2 million for the quarter
ended  September 30, 1998. For the first nine months of 1999,  distribution  and
service  fees were $45.3  million  compared to $39.0  million for the first nine
months of 1998.  These  increases  during 1999  compared to 1998 were  primarily
attributable to the higher asset levels of mutual funds with 12b-1  distribution
fees   and   contingent   deferred   sales   charges.   As   a   percentage   of
intermediary-distributed  average mutual fund assets,  distribution  and service
fees were  approximately  0.35% and 0.33% for the quarters  ended  September 30,
1999 and 1998,  respectively.  For the first nine months of 1999 and 1998,  such
percentages were 0.35% and 0.32%, respectively.

    Transfer  Agency Fees are based on the market value of assets managed in the
Company's intermediary-distributed,  direct-marketed and variable annuity mutual
funds.  Such fees were $13.1 million on average  assets of $26.0 billion for the
quarter ended  September  30, 1999 and $11.9 million on average  assets of $24.4
billion for the quarter ended  September 30, 1998.  For the first nine months of
1999, transfer agency fees were $38.8 million on average assets of $26.1 billion
and $36.6  million on average  assets of $24.8 billion for the first nine months
of 1998.  As a percentage  of total average  assets under  management,  transfer
agency fees were  approximately  0.20% for the quarters ended September 30, 1999
and 1998. For each of the first nine months of 1999 and 1998,  such  percentages
were also 0.20%.

   Surrender  Charges and Net  Commissions  are revenues earned on: a) the early
withdrawal   of  annuity   policyholder   balances   and   redemptions   of  the
intermediary-distributed  mutual  funds which were sold with 12b-1  distribution
fees and contingent deferred sales charges; b) the distribution of the Company's
intermediary-distributed  mutual funds (net of the  substantial  portion of such
commissions  that is  passed  on to the  selling  brokers);  and c) the sales of
non-proprietary  products in the Company's  bank  marketing  businesses  (net of
commissions  that are paid to the  Company's  client banks and  brokers).  Total
surrender  charges and net  commissions  were $9.6 million for the quarter ended
September 30, 1999 compared to $8.2 million for the quarter ended  September 30,
1998.  For the  first  nine  months of 1999,  total  surrender  charges  and net
commissions  were $27.0  million  compared  to $26.2  million for the first nine
months of 1998.

   Surrender  charges on fixed and variable  annuity  withdrawals  generally are
assessed at declining rates applied to policyholder withdrawals during the first
five to seven years of the contract; contingent deferred sales charges on mutual
fund redemptions are assessed at declining rates on amounts  redeemed  generally
during the first six years.  Such  charges  totaled $6.5 million for the quarter
ended  September 30, 1999 and $5.5 million for the quarter  ended  September 30,
1998.  For the first nine months of 1999,  surrender  charges were $18.0 million
compared  to $17.3  million  for the first nine  months of 1998.  Total  annuity
withdrawals   represented   15.2%  and  12.4%  of  the  total  average   annuity
policyholder  and separate account balances for the quarters ended September 30,
1999 and 1998,  respectively.  For the first nine  months of 1999 and 1998,  the
corresponding  percentages were 14.4% and 13.7%,  respectively.  Net commissions
were $3.1 million for the quarter ended  September 30, 1999 and $2.7 million for
the quarter  ended  September 30, 1998.  For the first nine months of 1999,  net
commissions were $9.0 million compared to $8.9 million for the first nine months
of 1998.

   Separate  Account Fees are primarily  mortality and expense charges earned on
variable annuity and variable life policyholder balances.  These fees, which are
primarily  based  on the  market  values  of the  assets  in  separate  accounts
supporting the contracts,  were $8.7 million for the quarter ended September 30,
1999 compared to $5.4 million for the quarter ended  September 30, 1998. For the
first nine months of 1999,  separate account fees were $23.0 million compared to
$15.5 million for the first nine months of 1998. Such fees represented 1.31% and
1.54% of average  institutional,  variable  annuity and variable  life  separate
account   balances  for  the  quarters  ended   September  30,  1999  and  1998,
respectively.  For the first nine months of 1999 and 1998, such percentages were
1.29% and 1.50%, respectively.

   Operating Expenses primarily  represent  compensation,  marketing,  and other
general and administrative  expenses.  These expenses were $89.1 million for the
quarter ended September 30, 1999 compared to $78.5 million for the quarter ended
September 30, 1998. For the first nine months of 1999,  operating  expenses were
$268.3  million  compared  to $238.5  million for the first nine months of 1998.
These  increases  during  1999  compared  to  1998  were  primarily  due  to the
acquisitions  of Crabbe  Huson and  Progress  in the second  half of 1998 and to
increases in compensation and marketing  expenses.  Operating expenses expressed
as a percent of average total assets under management were 0.58% for the quarter
ended  September 30, 1999 compared to 0.59% for the quarter ended  September 30,
1998. For the first nine months of 1999 and 1998,  such  percentages  were 0.59%
and 0.60%, respectively.

   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 costs include  commissions,  costs of
policy issuance and  underwriting and selling  expenses.  Amortization was $22.8
million for the quarter  ended  September 30, 1999 compared to $16.7 million for
the  quarter  ended  September  30,  1998.  For the first  nine  months of 1999,
amortization of deferred policy  acquisition costs was $69.5 million compared to
$56.7  million  for the first nine  months of 1998.  The  increase  during  1999
compared to 1998 was primarily related to the increase in investment spread from
the growth of business in force  associated with fixed and indexed  products and
the  increased  sales  of  variable  annuity  products.   Amortization   expense
represented  30.3% and 25.8% of investment  spread and separate account fees for
the quarters ended September 30, 1999 and 1998, respectively. For the first nine
months of 1999 and 1998,  the  corresponding  percentages  were 30.4% and 28.0%,
respectively.

   Amortization of Deferred  Distribution  Costs relates to the  distribution of
mutual fund shares sold with 12b-1  distribution  fees and  contingent  deferred
sales charges.  Amortization  was $10.2 million for the quarter ended  September
30, 1999 compared to $9.8 million for the quarter ended  September 30, 1998. For
the first nine months of 1999,  amortization of deferred  distribution costs was
$29.4 million compared to $27.9 million for the first nine months of 1998. These
increases  during  1999  compared  to 1998 were  primarily  attributable  to the
continuing sales of such fund shares during 1999 and 1998.

   Amortization   of   Intangible   Assets   relates  to  goodwill  and  certain
identifiable  intangible assets arising from business combinations accounted for
as purchases.  Amortization was $5.0 million for the quarter ended September 30,
1999 compared to $3.6 million for the quarter ended  September 30, 1998. For the
first nine months of 1999,  amortization of intangible  assets was $15.1 million
compared to $10.7 million for the first nine months of 1998.  These increases in
amortization  in 1999 compared to 1998 were  primarily  related to  acquisitions
completed in the second half of 1998.

   Interest  Expense,  Net was $4.6 million for the quarter ended  September 30,
1999 compared to $2.7 million for the quarter ended  September 30, 1998. For the
first nine months of 1999,  interest expense,  net was $15.6 million compared to
$10.5  million for the first nine  months of 1998.  Interest  expense  primarily
consists of interest on debt and interest on the Liberty  Funds Group  revolving
credit facility which is utilized to finance deferred sales  commissions paid in
connection  with  the  distribution  of  mutual  fund  shares  sold  with  12b-1
distribution  fees and contingent  deferred sales charges.  Interest expense was
net of interest  income of $4.3 million and $2.5 million for the quarters ending
September 30, 1999 and 1998, respectively. For the first nine months of 1999 and
1998,  interest  expense  was net of interest  income of $11.2  million and $5.0
million, respectively.

   Income Tax  Expense  was $12.5  million  or 33.7% of  pre-tax  income for the
quarter ended September 30, 1999 compared to $15.9 million,  or 32.2% of pre-tax
income for the quarter ended  September  30, 1998.  For the first nine months of
1999,  income tax expense was $41.8 million or 35.7% of pre-tax income  compared
to $43.6 million,  or 31.5% of pre-tax income for the first nine months of 1998.
The  significantly  lower  effective  tax  rate on  pre-tax  income  in 1998 was
primarily  related to a reduction in the deferred tax asset valuation  allowance
on federal net operating loss carryforwards.

Financial Condition

   Stockholders'  Equity was $1.27 billion as of September 30, 1999 and December
31,  1998.  Net income for the first nine  months of 1999 was $75.3  million and
cash dividends on the Company's preferred and common stock totaled $4.7 million.
Common stock totaling $5.1 million was issued in connection with the exercise of
stock options and awards of nonvested  stock.  A decrease in  accumulated  other
comprehensive income which consists of net unrealized  investment losses, net of
adjustments to deferred policy  acquisition  costs and income taxes,  during the
period decreased stockholders' equity by $76.5 million.

   Book Value Per Share  amounted to $26.90 at  September  30, 1999  compared to
$27.41  at  December  31,  1998.  Excluding  net  unrealized  gains or losses on
investments,  book value per share  amounted to $27.94 at September 30, 1999 and
$26.82 at December 31, 1998. As of September  30, 1999,  there were 47.3 million
common  shares  outstanding  compared to 46.4 million  shares as of December 31,
1998.

   Investments not including cash and cash equivalents, totaled $12.2 billion at
September 30, 1999 compared to $12.6 billion at December 31, 1998.

   The Company  manages the  majority of its  invested  assets  internally.  The
Company's  general  investment  policy is to hold fixed maturity  securities 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  entire  portfolio  of  fixed  maturity
securities as "available for sale" and accordingly  carries such  investments at
fair value.  The Company's total  investments at September 30, 1999 and December
31, 1998 reflected net unrealized  (losses) gains of $(230.7) million and $105.3
million, respectively, relating to its fixed maturity and equity portfolios.

   Approximately  $11.3 billion,  or 82.3%, of the Company's general account and
certain  separate  account  investments  at September  30,  1999,  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 September 30, 1999, the carrying value of investments
in below  investment  grade  securities  represented 8.8% of general account and
certain  separate  account   investments.   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 carefully  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 September 30, 1999, the carrying value of fixed maturity securities that were
non-income producing was $14.6 million.

Derivatives

   As a  component  of its  investment  strategy  and to reduce its  exposure to
interest  rate risk,  the Company  utilizes  interest rate swap  agreements  and
interest  rate cap  agreements  to match  assets  more  closely to  liabilities.
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  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.  The Company had 65 and 42 outstanding  interest rate
swap agreements with an aggregate  notional principal amount of $2.8 billion and
$2.4 billion as of September 30, 1999 and December 31, 1998, respectively.

   Interest rate cap agreements are agreements with a counterparty which 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  principal  balance  (notional  principal) to hedge
against rising interest rates. The Company had interest rate cap agreements with
an aggregate  notional  amount of $250.0  million as of  September  30, 1999 and
December 31, 1998.

   With respect to the Company's equity-indexed annuities, the Company buys call
options  and  futures on the S&P 500 Index to hedge its  obligations  to provide
returns  based upon this index.  The Company  had call  options  with a carrying
value of $515.4 million and $535.7 million as of September 30, 1999 and December
31, 1998,  respectively.  The Company had futures with a carrying value of $11.3
million and $(0.6)  million as of  September  30, 1999 and  December  31,  1998,
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  non-performance.  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.  Futures  contracts  trade on organized  exchanges and
therefore  have minimal credit risk. In addition,  swap and cap agreements  have
interest  rate risk and call options and futures  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 and cap
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 and futures  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 and futures  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 500 Index call  options and futures
increase less than (or decrease more than) the value of the  guarantees  made to
equity-indexed policyholders.

   In June 1998, Statement of Financial Accounting Standards No. 133 "Accounting
for Derivative  Instruments and Hedging  Activities" was issued.  This statement
standardizes  the  accounting  for  derivative  instruments  and the  derivative
portion  of  certain  other  contracts  that  have  similar  characteristics  by
requiring  that an  entity  recognize  those  instruments  at fair  value.  This
statement  also  requires a new method of accounting  for hedging  transactions,
prescribes the type of items and transactions that may be hedged,  and specifies
detailed criteria to be met to qualify for hedge accounting.  In June 1999, SFAS
No. 137 "Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133" was issued. SFAS No. 137 defers
for one year the effective  date of SFAS No. 133. This  statement now will apply
to all  fiscal  quarters  of all fiscal  years  beginning  after June 15,  2000.
Earlier  adoption is permitted.  Upon adoption,  the Company will be required to
record a cumulative effect adjustment to reflect this accounting change. At this
time,  the  Company  has  not  completed  its  analysis  and  evaluation  of the
requirements and the impact of this statement.

Liquidity

   The Company is a holding company whose liquidity needs include the following:
(i) operating  expenses;  (ii) debt service;  (iii) dividends on preferred stock
and common stock; (iv) acquisitions; and (v) working capital where needed by its
operating  subsidiaries.  The Company's  principal sources of cash are dividends
from its operating  subsidiaries,  and, in the case of funding for  acquisitions
and  certain  long-term  capital  needs  of  its  subsidiaries,  short-term  and
long-term borrowings and offerings of preferred and common stock.

   In April,  1999,  the Company  replaced its $60.0  million  revolving  credit
facility,  which was utilized to finance sales commissions paid by Liberty Funds
Group in connection with the  distribution of mutual fund shares sold with 12b-1
distribution  fees and  contingent  deferred  sales  charges,  with a new $150.0
million  revolving  credit  facility  (the  "Facility")  to be used for the same
purpose.  This new five year Facility is secured by such 12b-1 distribution fees
and  contingent  deferred  sales charges.  Interest  accrues on the  outstanding
borrowings  under the  Facility at a rate  determined  by sales of highly  rated
commercial  paper  backed  in part by the  security  interest  in such  fees and
charges.  At September  30,  1999,  the interest  paid on  borrowings  under the
Facility was at the rate of 5.54% per annum.

   Current Rhode Island  insurance law applicable to Keyport permits the payment
of dividends or distributions,  which, together with dividends and distributions
paid  during the  preceding  12  months,  do not exceed the lesser of (i) 10% of
Keyport's  statutory  surplus as of the preceding  December 31 or (ii) Keyport's
statutory 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 September 30, 1999, the amount of dividends that Keyport
could pay without  such  approval  was $49.1  million.  Keyport  paid  dividends
totaling $15.0 million during the first nine months of 1999.  Future  regulatory
changes and credit agreements may create  additional  limitations on the ability
of the Company's subsidiaries to pay dividends.

   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 working  capital,  capital  investment and
other operational cash needs, its debt service  obligations,  its obligations to
pay dividends on the preferred  stock and its intentions to pay dividends on the
common stock.  The Company may require external sources of liquidity in order to
finance material acquisitions where the purchase price is not paid in equity.

   Each of the  Company's  business  segments  has its own  liquidity  needs and
financial resources.  In the Company's annuity insurance  operations,  liquidity
needs and financial  resources  pertain to the management of the general account
assets and policyholder  balances.  In the Company's asset management  business,
liquidity needs and financial resources pertain to the investment management and
distribution  of mutual funds,  private  capital  management  and  institutional
accounts.  The Company expects that,  based upon their  historical cash flow and
current  prospects,  these  operating  subsidiaries  will be able to meet  their
liquidity  needs from internal  sources and, in the case of Liberty Funds Group,
from the Facility described above.

   Keyport  uses cash for the  payment of annuity and life  insurance  benefits,
operating   expenses  and  policy   acquisition   costs,  and  the  purchase  of
investments.  Keyport  generates  cash from annuity  premiums and deposits,  net
investment  income,  and from the sales  and  maturities  of fixed  investments.
Annuity   premiums,   maturing   investments  and  net  investment  income  have
historically  been  sufficient  to meet  Keyport's  cash  requirements.  Keyport
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,
Keyport  has  invested a  substantial  amount of its general  account  assets in
readily marketable securities.  As of September 30, 1999, $9.8 billion, or 74.5%
of Keyport's general account investments are considered readily marketable.

   To the  extent  that  unanticipated  surrenders  cause  Keyport  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
assurances can be given,  Keyport  believes that  liquidity to fund  anticipated
withdrawals  would  be  available  through  incoming  cash  flow and the sale of
short-term or floating-rate  investments,  thereby  precluding the sale of fixed
maturity  investments  in a potentially  unfavorable  market.  In addition,  the
Company's  fixed-rate  products  incorporate   surrender  charges  to  encourage
persistency and to make the cost of its policyholder  balances more predictable.
Approximately  76.7% of the Company's fixed annuity  policyholder  balances were
subject to surrender charges or restrictions as of September 30, 1999.

Year 2000

   Many  companies and  organizations  have computer  programs that use only two
digits to  identify  a year in the date  field and may not be able to  correctly
process  dates after  December  31,1999.  The Company  relies  significantly  on
computer  systems and  applications in its operations.  To the extent that these
systems are not Year 2000 compliant (i.e.  cannot correctly  process dates after
December 31, 1999) and such  non-compliance  is not corrected,  this could cause
system  failures.  Such  failures  could have an adverse  effect on the  Company
causing disruption of operations, including, among other things, an inability to
process transactions.

   In addressing the Year 2000 issue,  the Company has completed an inventory of
its information  technology  systems and assessed its Year 2000  readiness.  The
Company's systems include internally developed programs,  third-party  purchased
programs and  third-party  custom  developed  programs.  For programs which were
identified  as not being Year 2000  compliant,  the  Company has  implemented  a
remediation plan which includes  repairing or replacing the programs and testing
for  Year  2000  compliance.  The  remediation  is  complete  for  all  critical
applications and the Company believes that with  modifications  made to existing
software  and  conversions  to new  software,  the Year 2000 issue will not pose
significant  operational  problems for its computer  systems.  In addition,  all
non-compliant  hardware  components  of  the  Company's  information  technology
systems  have been  upgraded  or  replaced.  The  Company  also  identified  its
non-information  technology  systems  affected by Year 2000 issues.  The Company
initiated  remediation  efforts in this area and expects to complete  this phase
during the fourth quarter of 1999.

   The Company's Year 2000 efforts have included  assessing the potential impact
on the  Company  of third  parties'  failure  to  remediate  their own Year 2000
issues.  These efforts have included:  (1) identifying  third parties which have
significant business  relationships with the Company and inquiring of such third
parties regarding their Year 2000 readiness;  (2) evaluating such third parties'
responses to the Company's  inquiries;  and (3) conducting  additional inquiries
and  evaluations  with respect to third parties as determined to be necessary in
each case,  based on the nature of third  party  responses  or their  failure to
respond and the  significance  of the business  relationship.  In addition,  for
certain critical  applications,  the Company  participated in both industry-wide
testing  of  interfaces  with  third  parties  and  point-to-point   testing  of
interfaces with major business partners. The Company has substantially completed
initiatives (1) and (2). It is continuing to conduct the activities described in
(3) and anticipates that these activities will continue through the end of 1999.
However, because the Company does not have control over these third parties, the
Company cannot currently  determine to what extent future operating  results may
be  adversely  affected  by the  failure of these  third  parties to  adequately
address their Year 2000 issues.

   The  Company  has  developed  contingency  plans to  minimize  the  impact of
potential  Year 2000  problems on critical  systems.  The  contingency  planning
process involved  identifying  reasonably likely business  disruption  scenarios
that,  if they were to occur,  could  create  significant  problems  in critical
functions of the Company.  Alternative providers were then identified,  year-end
staffing  plans  were  finalized,   manual  work  arounds  were  developed,  and
prioritization  processes for problem resolution were developed.  Testing of the
contingency plans will continue through the end of 1999.

   The  complexity  of the Year 2000 issue gives rise to numerous  uncertainties
and extensive  preparation efforts cannot guarantee a total absence of Year 2000
problems.  If necessary  modifications  and conversions are not made, or are not
timely  completed,  or if the systems of the  companies  on which the  Company's
systems rely are not timely converted, or if contingency plans do not adequately
correct disruptions that could occur, the Year 2000 issues could have a material
impact on the operations of the Company.

   Prior to 1999,  the external cost of the Year 2000 project was  approximately
$2.5  million,  which was  primarily  related  to  consultants  and  replacement
hardware and  software.  Such  external  costs for the first nine months of 1999
were approximately $1.3 million.  The external costs to complete the project are
currently  expected to be an additional $1.3 million which are primarily related
to testing of certain non-critical applications.  The Company does not segregate
payroll or other internal costs  specifically  devoted to its efforts to address
Year 2000  issues.  All of the costs of the Year 2000 project have been and will
be funded  through  operating  cash flows and have been and will be  expensed as
incurred.  In the opinion of  management,  the cost of addressing  the Year 2000
issue  is not  expected  to have a  material  adverse  effect  on the  Company's
financial condition or its results of operations.

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 market 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  market  value,  while  net
investment income will decrease as fixed maturity investments mature or are sold
and the  proceeds  are  reinvested  at reduced  rates.  Inflation  may result in
increased  operating expenses that may not be readily  recoverable in the prices
of the services charged by the Company.

Forward-Looking Statements

   The Company desires to take advantage of the "safe harbor"  provisions of the
Private Securities  Litigation Reform Act of 1995 (the "Reform Act").  Investors
are  cautioned  that  all  statements,  trend  analyses  and  other  information
contained in this report or in any of the Company's  filings under Section 13 or
15 (d) of the Securities Exchange Act of 1934 (the "Exchange Act"),  relative to
the markets for the Company's products and trends in the Company's operations or
financial  results,  as  well  as  other  statements  including  words  such  as
"anticipate",  "believe",  "plan",  "estimate",  "expect",  "intend"  and  other
similar expressions, constitute forward-looking statements under the Reform Act.
These  forward-looking  statements  are  subject  to known  and  unknown  risks,
uncertainties and other factors, many of which are beyond the Company's control,
that may cause actual results to be materially different from those contemplated
by the forward-looking statements. Such factors include, among other things: (1)
general economic conditions and market factors, such as prevailing interest rate
levels,   stock  market   performance   and   fluctuations  in  the  market  for
retirement-oriented  savings products and investment management products,  which
may  adversely  affect the  ability  of the  Company  to sell its  products  and
services  and the market  value of the  Company's  investments  and assets under
management  and,  therefore,  the  portion of its  revenues  that are based on a
percentage  of assets  under  management;  (2) the  Company's  ability to manage
effectively its investment  spread (i.e. the amount by which  investment  income
exceeds  interest  credited to annuity and life  insurance  policyholders)  as a
result of changes in interest rates and crediting rates to policyholders, market
conditions and other factors (the Company's  results of operations and financial
condition  are  significantly  dependent  on the  Company's  ability  to  manage
effectively its investment  spread);  (3) levels of surrenders,  withdrawals and
net  redemptions  of the Company's  retirement-oriented  insurance  products and
investment  management  products;  (4) relationships with investment  management
clients,  including  levels of assets under  management;  (5) the ability of the
Company  to manage  effectively  certain  risks with  respect to its  investment
portfolio, including risks relating to holding below investment grade securities
and the ability to dispose of illiquid and/or  restricted  securities at desired
times and prices,  and the  ability to manage and hedge  against  interest  rate
changes through  asset/liability  management techniques;  (6) competition in the
sale of the Company's products and services,  including the Company's ability to
establish and maintain  relationships  with  distributors  of its products;  (7)
changes in  financial  ratings of Keyport or those of its  competitors;  (8) the
Company's  ability  to  attract  and  retain  key  employees,  including  senior
officers,  portfolio  managers  and  sales  executives;  (9) the  impact  of and
compliance  by the  Company  with  existing  and  future  regulation,  including
restrictions  on the ability of certain  subsidiaries  to pay  dividends and any
obligations of the Company under any guaranty fund assessment laws; (10) changes
in  applicable  tax laws  which may  affect  the  relative  tax  advantages  and
attractiveness  of  some of the  Company's  products;  (11)  the  result  of any
litigation or legal proceedings involving the Company; (12) changes in generally
accepted  accounting  principles  and the impact of  accounting  principles  and
pronouncements  on the Company's  financial  condition and results of operation;
(13) the impact of Year 2000  issues on the  operations  of the  Company and its
subsidiaries;  (14) changes in the Company's  senior debt ratings;  and (15) the
other risk factors or uncertainties  contained from time to time in any document
incorporated by reference in this report or otherwise filed by the Company under
the Exchange Act. Given these uncertainties, prospective investors are cautioned
not to place undue reliance on such forward-looking statements and no assurances
can be given that the estimates and  expectations  reflected in such  statements
will be achieved.

<PAGE>

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

   There have been no material  changes  during the first nine months of 1999 in
the  Company's  market risks or in the methods  which the Company uses to manage
such risks, which are described in the Company's 1998 Form 10-K.

                                     Part II

 Item 6.  Exhibits and Reports on Form 8-K

(a)   Exhibits

   12 Statement re Computation of Ratios
   27 Financial Data Schedule

(b)   Reports on Form 8-K

   There were no reports on Form 8-K filed  during the quarter ended
     September 30, 1999.

<PAGE>
                                   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.


                                    LIBERTY FINANCIAL COMPANIES, INC.

                                              /s/ J. Andy Hilbert
                                      -------------------------------------
                                                J. Andy Hilbert
                                          (Duly Authorized Officer and
                                            Chief Financial Officer)


Date:   November 12, 1999

<PAGE>
                                  Exhibit Index


Exhibit No.   Description                                              Page
-----------   -----------                                              ----

     12      Statement re Computation of Ratios
     27      Financial Data Schedule