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  March 31, 1998
                                                 ----------------

                                    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  45,077,187  shares of the  registrant's  Common  Stock,  $.01 par
value,  and 326,036 shares of the  registrant's  Series A Convertible  Preferred
Stock, $.01 par value, outstanding as of April 30, 1998.


Exhibit Index - Page 19                                             Page 1 of 21


<PAGE>


                        LIBERTY FINANCIAL COMPANIES, INC.
          QUARTERLY REPORT ON FORM 10-Q FOR PERIOD ENDED MARCH 31, 1998


                                TABLE OF CONTENTS


Part I.  FINANCIAL INFORMATION                                           Page
                                                                         ----

Item 1.  Financial Statements

         Consolidated Balance Sheets as of March      
           31, 1998 and December 31, 1997

         Consolidated Income Statements for the       
           Three Months Ended March 31, 1998 and 1997

         Consolidated Statements of Cash Flows for    
           the Three Months Ended March 31, 1998 and 1997

         Consolidated Statement of Stockholders'      
           Equity for the Three Months Ended March 31, 1998

         Notes to Consolidated Financial Statements   

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


Part II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K             

Signatures                                            

Exhibit Index

<PAGE>
<TABLE>
                        LIBERTY FINANCIAL COMPANIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                                 ($ in millions)

<CAPTION>
                                                  March 31          December 31
                                                    1998                1997  
                                                 ----------         -----------
                                                  Unaudited
                               ASSETS
<S>                                             <C>                <C>
Assets:
   Investments                                   $12,395.7          $12,343.5             
   Cash and cash equivalents                       1,410.2            1,290.1
   Accrued investment income                         166.9              165.0
   Deferred policy acquisition costs                 236.5              232.0
   Value of insurance in force                        52.7               53.3
   Deferred distribution costs                       107.0              108.1
   Intangible assets                                 197.8              199.0
   Other assets                                      324.1              131.4
   Separate account assets                         1,469.5            1,329.2
                                                 ----------         ----------
                                                 $16,360.4          $15,851.6
                                                 ==========         ==========


                   LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Policyholder balances                         $12,161.6          $12,086.1
   Notes payable to affiliates                       229.0              229.0
   Payable for investments                                 
     purchased and loaned                            971.1              722.1
   Other liabilities                                 345.2              336.9
   Separate account liabilities                    1,401.4            1,264.0
                                                 ----------         ----------
    Total liabilities                             15,108.3           14,638.1
                                                 ----------         ----------

Series A redeemable convertible
  preferred stock, par value $.01;
  authorized, issued and outstanding            
  326,036 shares in 1998 and 327,006 
  shares in 1997                                      14.7               14.6
                                                 ----------         ----------

Stockholders' Equity:
 Common stock, par value $.01;
  authorized 100,000,000 shares,
  issued 45,064,950 shares in 1998 and        
  44,706,398 shares in 1997                            0.5                0.4
 Additional paid-in capital                          873.1              866.5
 Accumulated other comprehensive income               87.9               83.0
 Retained earnings                                   278.1              251.5
 Cost of common stock held in treasury                      
  (9,465 shares at December 31, 1997)                  0.0               (0.3)
 Unearned compensation                                (2.2)              (2.2)
                                                 ----------         ----------
      Total stockholders' equity                   1,237.4            1,198.9
                                                 ----------         ----------
                                                 $16,360.4          $15,851.6
                                                 ==========         ==========

          See accompanying notes to consolidated financial statements.

</TABLE>
<PAGE>
<TABLE>
                        LIBERTY FINANCIAL COMPANIES, INC.
                         CONSOLIDATED INCOME STATEMENTS
                      (in millions, except per share data)
                                    Unaudited
<CAPTION>
                                                        Three Months Ended
                                                              March 31
                                                  -----------------------------
                                                     1998               1997
                                                  ----------         ----------
<S>                                                 <C>                <C>
Investment income                                    $207.4             $208.0
Interest credited to policyholders                   (142.1)            (147.3)
                                                  ----------         ----------
Investment spread                                      65.3               60.7
                                                  ----------         ----------
Net realized investment gains                           2.2               12.9
                                                  ----------         ----------
Fee income:
  Investment advisory and administrative fees          56.8               53.1
  Distribution and service fees                        12.6               12.1
  Transfer agency fees                                 12.2               11.8
  Surrender charges and net commissions                 8.4                8.5
  Separate account fees                                 4.7                3.9
                                                  ----------         ----------
Total fee income                                       94.7               89.4
                                                  ----------         ----------
Expenses:
  Operating expenses                                  (79.9)             (75.8)
  Amortization of deferred policy       
   acquisition costs                                  (19.0)             (16.3)
  Amortization of deferred distribution costs          (9.0)              (8.2)
  Amortization of value of insurance in force          (1.5)              (3.2)
  Amortization of intangible assets                    (3.5)              (3.2)
  Interest expense, net                                (3.9)              (4.5)
                                                  ----------         ----------
Total expenses                                       (116.8)            (111.2)
                                                  ----------         ----------

Pretax income                                          45.4               51.8
Income tax expense                                    (13.9)             (16.8)
                                                  ----------         ----------
Net income                                            $31.5              $35.0
                                                  ==========         ==========
Net income per share - basic                          $0.70              $0.81
                                                  ==========         ==========
Net income per share - assuming dilution              $0.67              $0.76
                                                  ==========         ==========


          See accompanying notes to consolidated financial statements.

</TABLE>
<PAGE>
<TABLE>

                     LIBERTY FINANCIAL COMPANIES, INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in millions)
                                  Unaudited
<CAPTION>
                                                       Three Months Ended
                                                            March 31
                                                  -----------------------------
                                                     1998               1997
                                                  ----------         ----------
<S>                                                  <C>                <C>
Cash flows from operating activities:
Net income                                            $31.5              $35.0
Adjustments to reconcile net income to
 net cash provided by operating activities:
  Depreciation and amortization                        19.0               18.2
  Interest credited to policyholders                  142.1              147.3
  Net realized investment gains                        (2.2)             (12.9)
  Net amortization (accretion) on investments          39.3               (8.1)
  Change in deferred policy acquisition costs          (0.2)              (0.6)
  Net change in other assets and liabilities          (26.2)             (18.0)
                                                  ----------         ----------
   Net cash provided by operating activities          203.3              160.9
                                                  ----------         ----------
Cash flows from investing activities:
 Investments purchased available for sale          (1,145.3)            (724.4)
 Investments sold available for sale                1,034.0              243.6
 Investments matured available for sale               287.5              450.5
 Change in policy loans, net                           (9.0)              (6.0)
 Change in mortgage loans, net                          1.4                1.7
                                                  ----------         ----------
   Net cash provided by (used in) investing                          
    activities                                        168.6              (34.6)
                                                  ----------         ----------
Cash flows from financing activities:
 Withdrawals from policyholder accounts              (393.1)            (299.4)
 Deposits to policyholder accounts                    167.4              202.3
 Securities lending                                   (23.2)             223.7
 Change in revolving credit facility                   (4.0)              (5.5)
 Exercise of stock options                              2.5                1.3
 Dividends paid                                        (1.4)              (1.0)
                                                  ----------         ----------
   Net cash provided by (used in) 
    financing activities                             (251.8)             121.4
                                                  ----------         ----------
 
 Increase in cash and cash equivalents                120.1              247.7
 Cash and cash equivalents at beginning          
   of period                                        1,290.1              875.8
                                                  ----------         ----------
 Cash and cash equivalents at end of period        $1,410.2           $1,123.5
                                                  ==========         ==========


          See accompanying notes to consolidated financial statements.

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

                                Accum.
                        Add'l.  Other                                 Total
               Common  Paid-In  Comp.   Retained  Treas.  Unearned Stockholders'
                Stock  Capital  Income  Earnings  Stock     Comp.     Equity
              -------  -------  ------- --------  ------  -------- ------------
<S>           <C>       <C>      <C>    <C>       <C>       <C>       <C>
Balance,
 December
 31, 1997       $0.4   $866.5    $83.0   $251.5   $(0.3)    $(2.2)    $1,198.9
Effect of
 stock-based   
 compensation
 plans           0.1      3.3                       0.3                    3.7
Accretion to
 face value of                          
 preferred 
 stock                                     (0.2)                          (0.2)
Common stock
 dividends                3.3              (4.5)                          (1.2)
Preferred stock       
 dividends                                 (0.2)                          (0.2)
Net income                                 31.5                           31.5
Other 
 comprehensive                 
 income, net 
 of tax                            4.9                                     4.9
              -------  -------  ------- --------  ------  -------- ------------
Balance, March
 31, 1998       $0.5   $873.1    $87.9   $278.1    $0.0     $(2.2)    $1,237.4
              =======  =======  ======= ========  ======  ======== ============




           See accompanying notes to consolidated financial statements.

</TABLE>
<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 1997
   Annual Report to Stockholders. The results of operations for the three months
   ended  March 31,  1998 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.  Industry Segment Information

     The Company is an asset  accumulation and management company which operates
   in  two  industry  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
   principally at The Colonial Group, Inc. ("Colonial"),  an investment advisor,
   distributor  and  transfer  agent  to  mutual  funds,  Stein  Roe  &  Farnham
   Incorporated ("Stein Roe"), a diversified investment advisor, Newport Pacific
   Management,  Inc.  ("Newport"),  an  investment  advisor to mutual  funds and
   institutional  accounts  specializing  in Asian equity  markets,  and Liberty
   Asset Management  Company  ("LAMCO"),  an investment advisor to mutual funds.
   The asset management business derives fee income from investment products and
   services.

     Approximately   63%  of  the  Company's  income  before  interest  expense,
   amortization  of intangible  assets,  net realized gains and income taxes for
   the three  months  ended March 31,  1998 was  attributable  to the  Company's
   annuity  insurance  business,  with the  remaining  37%  attributable  to the
   Company's asset management activities. This compares to approximately 65% and
   35%, respectively, during the year earlier period.

3.  Investments

     Investments,  all of  which  pertain  to the  Company's  annuity  insurance
   operations, were comprised of the following (in millions):

<TABLE>
<CAPTION>


                                              March 31            December 31
                                                1998                 1997
                                            -----------           -----------
   <S>                                      <C>                   <C>  
    Fixed maturities                         $11,187.4             $11,246.5
    Equity securities                             41.5                  40.8
    Mortgage loans                                59.2                  60.7
    Policy loans                                 563.7                 554.7
    Other invested assets                        543.9                 440.8
                                            -----------           -----------
        Total                                $12,395.7             $12,343.5
                                            ===========           ===========
</TABLE>

     The Company's  general  investment  policy is to hold fixed maturity assets
   for  long-term  investment  and,  accordingly,  the  Company  does not have a
   trading  portfolio.  To provide for maximum portfolio  flexibility and enable
   appropriate tax planning,  the Company classifies its entire fixed maturities
   investments  as  "available  for sale"  which are carried 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 (in millions, except
   share and per share data):

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                                 March 31
                                                           -------------------
                                                             1998        1997
                                                           -------      ------
   <S>                                                     <C>          <C>    
    Numerator:
     Net income                                             $31.5        $35.0
     Preferred stock dividends                               (0.2)        (0.2)
                                                           -------       ------
     Numerator for net income per share -
      basic - income available to common            
      stockholders                                           31.3         34.8
     Effect of dilutive securities:
      Preferred stock dividends                               0.2          0.2
                                                           -------       ------
                                                              0.2          0.2
                                                           -------       ------
      Numerator for net income per share 
        - assuming dilution - income 
        available to common stockholders          
        after assumed conversions                            31.5         35.0
    Denominator:
      Denominator for net income per
        share - basic - weighted-average shares        44,747,459   43,163,696
      Effect of dilutive securities:
        Employee stock options                          1,828,980    2,571,529
        Convertible preferred stock                       517,474      518,457
                                                       -----------  -----------
      Dilutive potential common shares                  2,346,454    3,089,986
                                                       -----------  -----------
        Denominator for net income per                   
         share - assuming dilution -
         adjusted weighted-average shares
         and assumed conversions                       47,093,913   46,253,682
                                                      ============  ===========

      Net income per share - basic                          $0.70        $0.81
                                                      ============  ===========
      Net income per share - assuming               
         dilution                                           $0.67        $0.76
                                                      ============  ===========
</TABLE>

5.   Recent Accounting Change

     As  of  January  1,  1998,  the  Company  adopted  Statement  of  Financial
   Accounting Standards No. 130, "Reporting  Comprehensive Income" ("SFAS 130").
   SFAS 130 establishes new rules for the reporting and display of comprehensive
   income and its components; however, the adoption of SFAS 130 had no impact on
   the  Company's  net  income  or  stockholders'   equity.  SFAS  130  requires
   unrealized  gains or losses on the Company's  available-for-sale  securities,
   which prior to adoption were reported separately in stockholders'  equity, to
   be included in accumulated other comprehensive  income.  Prior year financial
   statements have been reclassified to conform to the requirements of SFAS 130.

     During the first quarters of 1998 and 1997, comprehensive income (loss) was
   comprised of the following (in millions):

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                                 March 31
                                                          ---------------------
                                                           1998           1997
                                                          ------         ------
   <S>                                                   <C>            <C>
    Net income                                            $31.5          $35.0
    Other comprehensive income (loss),
     net of tax:          
      Change in net unrealized 
       investment gains                                     4.9          (43.7)
                                                          ------         ------ 
    Comprehensive income (loss)                           $36.4          $(8.7)
                                                          ======         ======
</TABLE>
<PAGE>
6.  Recent Accounting Pronouncement

     In April 1998, the Financial  Accounting  Standards  Board voted to proceed
   with  the  drafting  of an  accounting  statement  entitled  "Accounting  for
   Derivative  Instruments and for Hedging  Activities," which is expected to be
   issued by mid-June.  This  statement  will  standardize  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. This statement will become effective for fiscal
   years beginning after June 15, 1999. Earlier adoption is permitted as of July
   1, 1998. The Company is evaluating the impact of this statement.

<PAGE>


   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL 
CONDITION

Results of Operations

   Net Income was $31.5  million or $0.67 per share in the first quarter of 1998
compared to $35.0 million or $0.76 per share in the first  quarter of 1997.  The
decrease  of $3.5  million  in 1998  compared  to 1997  resulted  from lower net
realized  investment  gains  and  higher  operating  expenses  and  amortization
expense.  Partially offsetting these items were higher investment spread and fee
income and lower income tax expense.

   Pretax  Income was $45.4  million in the first  quarter of 1998  compared  to
$51.8  million in the first  quarter of 1997.  The lower  pretax  income in 1998
compared to 1997  resulted from lower net realized  investment  gains and higher
operating expenses and amortization  expense.  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 $65.3  million in the first  quarter of 1998  compared to
$60.7  million  in the first  quarter of 1997.  The amount by which the  average
yield on investments  exceeds the average interest credited rate on policyholder
balances is the investment spread percentage.  Such investment spread percentage
in the first quarter of 1998 was 1.89% compared to 1.90% in the first quarter of
1997.

   Investment income was $207.4 million in the first quarter of 1998 compared to
$208.0  million in the first  quarter of 1997.  The  decrease of $0.6 million in
1998 compared to 1997 primarily  relates to a $10.7 million  decrease  resulting
from a lower  average  investment  yield,  largely  offset  by a  $10.1  million
increase as a result of the higher level of average  invested  assets.  The 1998
investment  income  was net of  $17.3  million  of S&P  500  Index  call  option
amortization expense related to the Company's  equity-indexed annuities compared
to $7.8  million in 1997.  The average  investment  yield was 6.58% in the first
quarter of 1998 compared to 6.94% in the first quarter of 1997.

   Interest  credited  to  policyholders  totaled  $142.1  million  in the first
quarter of 1998  compared to $147.3  million in the first  quarter of 1997.  The
decrease of $5.2 million in 1998 compared to 1997  primarily  relates to a $10.2
million  decrease  resulting  from  a  lower  average  interest  credited  rate,
partially  offset by a $5.0  million  increase as a result of a higher  level of
average  policyholder  balances.  Policyholder  balances  averaged $12.1 billion
(including  $10.5 billion of fixed  products,  consisting of fixed annuities and
the closed block of single  premium  whole life  insurance,  and $1.6 billion of
equity-indexed annuities) in the first quarter of 1998 compared to $11.7 billion
(including  $10.8 billion of fixed  products and $0.9 billion of  equity-indexed
annuities) in the first quarter of 1997. The average interest  credited rate was
4.69% (5.31% on fixed  products and 0.85% on  equity-indexed  annuities)  in the
first  quarter of 1998  compared to 5.04% (5.37% on fixed  products and 0.85% on
equity-indexed annuities) in the first quarter of 1997. Keyport's equity-indexed
annuities credit interest to the policyholder at a "participation rate" equal to
a portion (ranging for existing policies from 55% 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.

   Average investments in the Company's general account (computed without giving
effect  to SFAS  115),  including  a  portion  of the  Company's  cash  and cash
equivalents,  were $12.6  billion in the first quarter of 1998 compared to $12.0
billion  in the first  quarter of 1997.  The  increase  of $0.6  billion in 1998
compared  to 1997  primarily  relates  net  insurance  cash flows for the twelve
months ended March 31, 1998.

   Net Realized  Investment Gains were $2.2 million in the first quarter of 1998
compared to $12.9 million in the first quarter of 1997.  Sales of fixed maturity
investments  generally  are made to  maximize  total  return.  The net  realized
investment  gains  in  1998  included  gains  on the  sales  of  fixed  maturity
investments of $0.8 million and gains on sales of general  corporate  securities
of $1.4 million.  The net realized investment gains in 1997 were attributable to
sales of the Company's fixed maturity investments.

   Investment  Advisory and Administrative Fees are based on the market value of
assets managed for mutual funds, wealth management and institutional  investors.
Investment  advisory  and  administrative  fees were $56.8  million in the first
quarter of 1998  compared  to $53.1  million in the first  quarter of 1997.  The
increase of $3.7 million in 1998  compared to 1997  primarily  reflects a higher
level of average fee-based assets under management.

   Average  fee-based  assets under  management  were $39.4 billion in the first
quarter of 1998  compared  to $35.8  billion in the first  quarter of 1997.  The
increase of $3.6 billion  during 1998 compared to 1997 resulted  primarily  from
market  appreciation.  Investment advisory and administrative fees were 0.58% of
average fee-based assets under management in the first quarter of 1998 and 0.59%
in the first quarter of 1997.

   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).


<TABLE>
Fee-Based Assets Under Management
<CAPTION>
                                                              As of March 31
                                                          --------------------
                                                           1998          1997
                                                          ------        ------
<S>                                                      <C>           <C>
Mutual Funds:
    Intermediary-distributed                              $16.8         $15.6
    Direct-marketed                                         7.6           6.2
    Closed-end                                              2.3           1.9
    Variable annuity                                        1.4           1.1
                                                          ------        ------
                                                           28.1          24.8
    Wealth Management                                       7.2           5.5
    Institutional                                           5.5           4.5
                                                          ------        ------
     Total Fee-Based                                      
      Assets Under Management*                            $40.8         $34.8
                                                          ======        ======
--------------
*  As of March 31, 1998 and 1997,  Keyport's  insurance  assets of $13.0 billion
   and $12.2 billion, respectively, bring total assets under management to $53.8
   billion and $47.0 billion, respectively.
</TABLE>
<TABLE>
Changes in Fee-Based Assets Under Management
<CAPTION>
                                                            Three Months Ended
                                                                 March 31
                                                          --------------------
                                                           1998          1997
                                                          ------        ------
<S>                                                      <C>           <C>
Fee-based assets under management                         
  - beginning                                             $38.7         $35.9
Sales and reinvestments                                     1.9           1.8
Redemptions and withdrawals                                (1.7)         (2.0)
Market appreciation (depreciation)                          1.9          (0.9)
                                                          ------        ------
Fee-based assets under management                         
  - ending                                                $40.8         $34.8
                                                          ======        ======
</TABLE>

   Distribution  and Service Fees are based on the market value of the Company's
intermediary-distributed  mutual funds. Distribution fees of 0.75% are earned on
the average  assets  attributable  to such funds sold with  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  $12.6 million in the first quarter of 1998 compared to $12.1
million  in the first  quarter of 1997.  The  increase  of $0.5  million in 1998
compared to 1997 was primarily attributable to the higher asset levels of mutual
funds with  contingent  deferred  sales  charges.  As a  percentage  of weighted
average assets,  distribution and service fees were  approximately  0.71% in the
first quarters of 1998 and 1997.

   Transfer  Agency Fees are based on the market value of assets  managed in the
Company's  intermediary-distributed  and direct-marketed mutual funds. Such fees
were $12.2  million on average  assets of $25.0  billion in the first quarter of
1998 and $11.8  million on average  assets of $23.6 billion in the first quarter
of 1997. As a percentage of total average  mutual fund assets under  management,
transfer agency fees were approximately  0.20% in the first quarters of 1998 and
1997.

   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 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 $8.4 million in the first  quarter of 1998  compared to $8.5 million in the
first quarter of 1997.

   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 $5.3 million and $4.8 million
in the first quarters of 1998 and 1997, respectively.  Total annuity withdrawals
represented  14.1% and  11.2% of the  total  average  annuity  policyholder  and
separate account balances in the first quarters of 1998 and 1997,  respectively.
The increase in annualized  withdrawals  in 1998 was primarily  attributable  to
surrenders of a certain block of single premium  deferred  annuities  which came
out of their surrender charge period during the first quarter of 1998; excluding
these surrenders,  the withdrawal  percentage in 1998 was 11.6%. Net commissions
were $3.1  million in the first  quarter  of 1998 and $3.7  million in the first
quarter of 1997.

   Separate  Account Fees are primarily  mortality and expense charges earned on
variable annuity and variable life policyholder balances.  These fees, which are
based on the market  values of the assets in separate  accounts  supporting  the
contracts  were $4.7  million  in the first  quarter  of 1998  compared  to $3.9
million in the first quarter of 1997. Such fees  represented  1.43% and 1.55% of
average  variable  annuity and variable  life separate  account  balances in the
first quarters of 1998 and 1997, respectively.

   Operating Expenses primarily  represent  compensation,  marketing,  and other
general and  administrative  expenses.  These expenses were $79.9 million in the
first  quarter of 1998  compared to $75.8  million in the first quarter of 1997.
The  increase  in 1998  compared  to 1997  was  primarily  due to  increases  in
compensation and marketing  expenses.  Operating expenses expressed as a percent
of  average  total  assets  under  management  were 0.61% and 0.63% in the first
quarters of 1998 and 1997, 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 $19.0
million in the first  quarter  of 1998  compared  to $16.3  million in the first
quarter of 1997.  The  increase  in  amortization  in 1998  compared to 1997 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 29.10% and
26.85%  of  investment   spread  in  the  first   quarters  of  1998  and  1997,
respectively.

   Amortization  of Deferred  Distribution  Costs relates to the deferred  sales
commissions  acquired  in  connection  with  the  Colonial  acquisition  and the
distribution of mutual fund shares sold with contingent  deferred sales charges.
Amortization  was $9.0  million in the first  quarter of 1998  compared  to $8.2
million in the first quarter of 1997.  The increase in 1998 compared to 1997 was
primarily  attributable to the continuing  sales of such fund shares during 1998
and 1997.

   Amortization    of   Value   of   Insurance   in   Force   relates   to   the
actuarially-determined  present  value of projected  future  gross  profits from
policies in force at the date of acquisition.  Amortization totaled $1.5 million
in the first  quarter of 1998  compared to $3.2 million in the first  quarter of
1997. The decrease in amortization in 1998 compared to 1997 was primarily due to
reduced amortization related to a change in mortality assumptions.

   Amortization   of   Intangible   Assets   relates  to  goodwill  and  certain
identifiable  intangible assets arising from business combinations accounted for
as  purchases.  Amortization  was $3.5  million  in the  first  quarter  of 1998
compared to $3.2 million in the first quarter of 1997.

   Interest Expense,  Net was $3.9 million in the first quarter of 1998 compared
to $4.5 million in the first  quarter of 1997.  The decrease of $0.6 million was
due to lower interest  expense  related to Colonial's  credit  facility which is
utilized  to finance the sale of shares of mutual  funds  which have  contingent
deferred  sales charges and to higher  interest  income which is netted  against
interest expense.

   Income Tax Expense was $13.9  million or 30.6% of pretax  income in the first
quarter of 1998  compared  to $16.8  million,  or 32.4% of pretax  income in the
first quarter of 1997.

Financial Condition

   Stockholders' Equity as of March 31, 1998 was $1.24 billion compared to $1.20
billion as of December  31,  1997.  Net income in the first  quarter of 1998 was
$31.5  million and cash  dividends on the  Company's  preferred and common stock
totaled  $1.4  million.  Common  stock  totaling  $2.5  million  was  issued  in
connection  with the exercise of stock  options.  In  addition,  the exercise of
certain stock options resulted in a federal income tax benefit to the Company of
$1.0 million which was credited to additional  paid-in  capital.  An increase in
accumulated other comprehensive  income, net unrealized investment gains, net of
adjustments  to deferred  policy  acquisition  costs and value of  insurance  in
force, during the period increased stockholders' equity by $4.9 million.

   Book Value Per Share  amounted to $27.46 at March 31, 1998 compared to $26.82
at December 31, 1997. Excluding net unrealized gains on investments,  book value
per share  amounted to $25.51 at March 31, 1998 and $24.97 at December 31, 1997.
As of March 31, 1998, there were 45.1 million common shares outstanding compared
to 44.7 million shares as of December 31, 1997.

   Investments not including cash and cash equivalents, totaled $12.4 billion at
March 31, 1998 compared to $12.3 billion at December 31, 1997.

   The  Company  manages  the  substantial   majority  of  its  invested  assets
internally.  The Company's  general  investment policy is to hold fixed maturity
assets 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 fixed maturities investments as
"available for sale" and accordingly carries such investments at fair value. The
Company's  total  investments  at March 31, 1998 and December 31, 1997 reflected
net  unrealized  gains of  $276.1  million  and  $280.2  million,  respectively,
relating to its fixed maturity and equity portfolios.

   Approximately  $11.0  billion,  or 80.5%,  of the Company's  general  account
investments  at March 31,  1998,  was 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, 1998,  the carrying value of  investments  in below  investment  grade
securities totaled $1.1 billion, or 8.0% of general account investments of $13.7
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.

Management of the Company's Investments

   Asset-liability  duration  management  is utilized by the Company to minimize
the risks of  interest  rate  fluctuations  and  policyholder  withdrawals.  The
Company  believes  that its fixed and indexed  policyholder  balances  should be
backed by investments,  principally comprised of fixed maturities, that generate
predictable rates of return. The Company does not have a specific target rate of
return.  Instead,  its rates of return vary over time  depending  on the current
interest  rates,  the slope of the yield  curve  and the  excess at which  fixed
maturities are priced over the yield curve.  Its portfolio  strategy is designed
to achieve acceptable  risk-adjusted  returns by effectively  managing portfolio
liquidity and credit quality.

   The Company conducts its investment  operations to closely match the duration
of the assets in its  investment  portfolio to its  policyholder  balances.  The
Company  seeks to  achieve an  acceptable  spread  between  what it earns on its
assets  and  interest  credited  on  its  policyholder   balances  by  investing
principally in fixed maturities.  The Company's  fixed-rate products incorporate
surrender  charges  to  encourage  persistency  and  to  make  the  cost  of its
policyholder  balances more  predictable.  Approximately  82.2% of the Company's
fixed annuity  policyholder  balances were subject to surrender charges at March
31, 1998.

   As part of its asset-liability  management  discipline,  the Company conducts
detailed  computer   simulations  that  model  its  fixed-maturity   assets  and
liabilities  under commonly used stress-test  interest rate scenarios.  Based on
the results of these computer  simulations,  the  investment  portfolio has been
constructed with a view toward  maintaining a desired  investment spread between
the yield on portfolio assets and the interest credited on policyholder balances
under a variety of possible future  interest rate scenarios.  At March 31, 1998,
the effective duration of the Company's fixed maturities  investments (including
certain cash and cash equivalents) was approximately  2.9. Effective duration is
a common  measure  for the price  sensitivity  of a  fixed-income  portfolio  to
changes in interest rates. It measures the approximate  percentage change in the
market value of a portfolio when interest rates change by 100 basis points. This
measure  includes the impact of estimated  changes in portfolio  cash flows from
features such as prepayment and bond calls.

   As a  component  of its  investment  strategy  and to reduce its  exposure to
interest rate risk, the Company  utilizes  interest rate swap agreements  ("swap
agreements") and interest rate cap agreements ("cap agreements") to match assets
more closely to  liabilities.  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 swap agreements to reduce asset duration and to better match
interest rates earned on longer-term fixed rate assets with interest credited to
policyholders. The Company had 46 and 45 outstanding swap agreements as of March
31,  1998 and  December  31,  1997,  respectively,  with an  aggregate  notional
principal amount of $2.6 billion.

   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 March 31, 1998 and December 31, 1997.

   With respect to the Company's equity-indexed annuities, the Company buys call
options on the S&P 500 Index to hedge its  obligation  to provide  returns based
upon this  index.  The  Company  had call  options  with a book  value of $478.6
million  and  $323.3  million  as of March  31,  1998  and  December  31,  1997,
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.  In addition,  swap and cap agreements have interest rate risk and call
options 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 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  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.  Keyport'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  increase less than (or decrease more than) the value of the  guarantees
made to equity-indexed policyholders.

   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  maturities
investments,  management  also considers  market value  quotations if available.
There were no non-income  producing  investments in the Company's fixed maturity
portfolio at March 31, 1998 or December 31, 1997.

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,  long-term  borrowings,
which to date have been from  affiliates  of Liberty  Mutual  Insurance  Company
("Liberty Mutual").

   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 March 31, 1998,  the amount of  dividends  that Keyport
could pay without such approval was $70.3 million. However, Keyport has not paid
any dividends since its acquisition in 1988.

   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 and the  assumption  that  Liberty
Mutual will  continue to  participate  in the Dividend  Reinvestment  Plan,  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 anticipates that it
would  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, wealth 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  Colonial,  from its credit
facility  used to  finance  sales of mutual  fund  shares  sold with  contingent
deferred sales charges.

   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 March 31, 1998, $10.6 billion, or 77.6% 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  instruments,  thereby  precluding the sale of fixed
maturity investments in a potentially unfavorable market.

Year 2000

   Many  companies and  organizations  have computer  programs that use only two
digits to identify a year in the date field.  These  programs  were designed and
developed without  considering the impact of the upcoming change in the century.
If not corrected,  this could cause a system failure or miscalculations  causing
disruptions of operations,  including, among other things, a temporary inability
to process transactions.

   In addressing the Year 2000 issue, the Company has substantially completed an
inventory of its computer  programs  and assessed its Year 2000  readiness.  The
Company's computer programs include internally  developed programs,  third-party
purchased programs and third-party custom developed programs. For programs which
were  identified as not being Year 2000 ready,  the Company is in the process of
implementing a remedial plan which includes  repairing or replacing the programs
and  appropriate  testing for Year 2000. In addition,  the Company has initiated
communication  with third parties to determine the extent to which the Company's
interface  systems are vulnerable to those third  parties'  failure to remediate
their own Year 2000 issues.

   If such  modifications  and  conversions  are  not  made,  or are not  timely
completed,  or if the systems of the companies on which the Company's  interface
system  relies  are not  timely  converted,  the Year 2000  issues  could have a
material impact on the operations of the Company.  However, the Company believes
that with  modifications  to existing  software and conversions to new software,
the Year 2000  issue  will not pose  significant  operational  problems  for its
computer systems.

   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 operation.

Effects of Inflation

   Inflation has not had a material effect on the Company's consolidated results
of operations.  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 instance,  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. However,  inflation may result
in  increased  operating  expenses  that may not be readily  recoverable  in the
prices of the services charged by the Company.

<PAGE>

 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 March 31,
   1998.


<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:   May 14, 1998



<PAGE>



                                  Exhibit Index


Exhibit No.   Description                                               Page
-----------   -----------                                               ----
   12         Statement re Computation of Ratios                         
   27         Financial Data Schedule