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 June 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  47,097,012  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 July 31, 1999.

Exhibit Index - Page 23                                             Page 1 of 25

<PAGE>
                        LIBERTY FINANCIAL COMPANIES, INC.
          QUARTERLY REPORT ON FORM 10-Q FOR PERIOD ENDED JUNE 30, 1999


                                TABLE OF CONTENTS


Part I.     FINANCIAL INFORMATION                                       Page


Item 1.     Financial Statements

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

            Consolidated Income Statements for the Three Months and
             Six Months Ended June 30, 1999 and 1998


            Consolidated Statements of Cash Flows for the Six Months
             Ended  June 30, 1999 and 1998


            Consolidated Statement of Stockholders' Equity for the
             Six Months Ended June 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 4      Submission of Matters to a Vote of Security Holders

Item 6.     Exhibits and Reports on Form 8-K

Signatures

Exhibit Index

<PAGE>

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


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

Assets:
   Investments                                  $12,860.6       $12,598.3
   Cash and cash equivalents                        951.1           984.1
   Accrued investment income                        177.7           161.0
   Deferred policy acquisition costs                479.0           341.0
   Value of insurance in force                       84.5            66.6
   Deferred distribution costs                      148.8           130.2
   Intangible assets                                288.3           292.8
   Other assets                                     222.2           179.6
   Separate account assets                        2,662.7         1,765.5
                                               ------------    ------------
                                                $17,874.9       $16,519.1
                                               ============    ============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Policyholder balances                        $12,354.6       $12,504.1
   Notes payable                                    525.9           486.4
   Payable for investments purchased
     and loaned                                     807.9           240.4
   Other liabilities                                290.9           278.4
   Separate account liabilities                   2,604.3         1,723.2
                                               ------------    ------------
      Total liabilities                          16,583.6        15,232.5
                                               ------------    ------------


Series A redeemable convertible preferred
 stock, par value $.01; authorized, issued
 and outstanding 324,759 shares in 1999 and          15.7            15.3
 1998                                          ------------    ------------

Stockholders' Equity:
 Common stock, par value $.01; authorized
  100,000,000 shares, issued and outstanding
  47,008,242 shares in 1999 and 46,384,015
  shares in 1998                                      0.5             0.5
Additional paid-in capital                          913.3           901.5
Retained earnings                                   386.8           346.4
Accumulated other comprehensive income (loss)       (19.3)           27.2
Unearned compensation                                (5.7)           (4.3)
                                               ------------    ------------
  Total stockholders' equity                      1,275.6         1,271.3
                                               ------------    ------------
                                                $17,874.9       $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  Six Months Ended
                                                June 30            June 30
                                          ------------------  ------------------
                                            1999       1998     1999       1998
                                          -------    -------  -------    -------

Investment income                         $197.1     $202.3    $403.3    $409.7
Interest credited to policyholders        (129.4)    (140.2)   (264.2)   (282.3)
                                          -------    -------  --------   -------
Investment spread                           67.7       62.1     139.1     127.4
                                          -------    -------  --------   -------
Net realized investment losses             (11.6)      (2.4)    (14.7)     (0.2)
                                          --------   -------  --------   -------
Fee income:
 Investment advisory and administrative
   fees                                     68.2       59.3     134.4     116.1
 Distribution and service fees              15.3       13.2      30.0      25.8
 Transfer agency fees                       12.8       12.5      25.7      24.7
 Surrender charges and net commissions       9.0        9.6      17.4      18.0
 Separate account fees                       7.7        5.4      14.3      10.1
                                          --------   -------  --------   -------
Total fee income                           113.0      100.0     221.8     194.7
                                          --------   -------  --------   -------
Expenses:
 Operating expenses                        (90.5)     (80.1)   (179.2)   (160.0)
 Amortization of deferred policy
  acquisition costs                        (20.1)     (18.3)    (42.1)    (37.3)
 Amortization of deferred distribution
  costs                                     (9.7)      (9.1)    (19.2)    (18.1)
 Amortization of value of insurance
  in force                                  (2.4)      (1.2)     (4.6)     (2.7)
 Amortization of intangible assets          (5.1)      (3.6)    (10.1)     (7.1)
 Interest expense, net                      (5.3)      (3.9)    (11.0)     (7.8)
                                          -------    -------  --------   -------
Total expenses                            (133.1)    (116.2)   (266.2)   (233.0)
                                          -------    -------  --------   -------
Pre-tax income                              36.0       43.5      80.0      88.9
Income tax expense                         (12.7)     (13.8)    (29.3)    (27.7)
                                          -------    -------  --------   -------
Net income                                $ 23.3     $ 29.7    $ 50.7    $ 61.2
                                          =======    =======   =======   =======

Net income per share - basic              $  0.49    $  0.65   $  1.08    $ 1.35
                                          =======    =======   =======   =======
Net income per share - assuming
 dilution                                 $  0.49    $  0.63   $  1.06    $ 1.29
                                          =======    =======   ========  =======


          See accompanying notes to consolidated financial statements.

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

                                                             Six Months Ended
                                                                 June 30
                                                           ---------------------
                                                             1999        1998
                                                           ---------   ---------

Cash flows from operating activities:
Net income                                                 $   50.7    $   61.2
Adjustments to reconcile net income to net cash
 provided by operating activities:
   Depreciation and amortization                               41.3        37.3
   Interest credited to policyholders                         264.2       282.3
   Net realized investment losses                              14.7         0.2
   Net amortization on investments                             39.3        28.2
   Change in deferred policy acquisition  costs               (10.9)      (20.9)
   Net change in other assets and liabilities                 (50.2)      (70.2)
                                                           ---------   ---------
      Net cash provided by operating activities               349.1       318.1
                                                           ---------   ---------
Cash flows from investing activities:
   Investments purchased available for sale                (3,080.4)   (3,498.3)
   Investments sold available for sale                      2,529.3     2,690.8
   Investments matured available for sale                     159.2       561.2
   Change in policy loans, net                                 (8.3)      (19.3)
   Change in mortgage loans, net                               41.7         2.9
   Other                                                      (28.6)       32.1
                                                           ---------   ---------
      Net cash used in investing activities                  (387.1)     (230.6)
                                                           ---------   ---------
Cash flows from financing activities:
   Withdrawals from policyholder accounts                    (962.4)     (850.8)
   Deposits to policyholder accounts                          358.0       775.2
   Securities lending                                         570.3        17.0
   Change in notes payable                                     39.5         2.0
   Exercise of stock options                                    2.8         4.7
   Dividends paid                                              (3.2)       (2.9)
                                                           ---------   ---------
      Net cash provided by (used in) financing
       activities                                               5.0       (54.8)
                                                           ---------   ---------
   Increase (decrease) in cash and cash equivalents           (33.0)       32.7
   Cash and cash equivalents at beginning of period           984.1     1,290.1
                                                           ---------   ---------
   Cash and cash equivalents at end of period              $  951.1    $1,322.8
                                                           =========   =========


          See accompanying notes to consolidated financial statements.

<PAGE>

                       LIBERTY FINANCIAL COMPANIES, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 (in millions)
                                   Unaudited
                                               Accum.
                                               Other
                          Addt'l.            Comprehen.                Total
                 Common   Paid-In  Retained    Income    Unearned  Stockholders'
                 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                       5.1                            (1.4)           3.7
Accretion to
 face value of
 preferred stock                      (0.4)                                (0.4)
Common stock
 dividends                   6.7      (9.4)                                (2.7)
Preferred stock
 dividends                            (0.5)                                (0.5)
Net income                            50.7                                 50.7
Other
 comprehensive
 income (loss),
 net of tax                                      (46.5)                   (46.5)
                 ------  --------  --------  ---------- ---------  -------------
Balance,
 June
 30, 1999         $0.5    $913.3    $386.8      $(19.3)    $(5.7)      $1,275.6
                 ======  ========  ========  ========== =========  =============


          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 six months
   ended  June 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, 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     Six Months Ended
                                             June 30              June 30
                                       ------------------     -----------------
                                         1999      1998         1999     1998
                                       --------  --------     -------- --------
 Statement of Operations Data
 Revenues (excluding net realized
  investment gains and losses):
  Annuity:
   Unaffiliated                         $213.3    $216.2       $433.1   $435.2
   Intersegment                           (3.9)     (2.9)        (6.8)    (5.2)
                                       --------  --------     -------- --------
   Total annuity                         209.4     213.3        426.3    430.0
                                       --------  --------     -------- --------
  Asset management:
   Unaffiliated                           96.8      86.1        192.0    169.2
   Intersegment                            3.9       2.9          6.8      5.2
                                       --------  --------     -------- --------
   Total asset management                100.7      89.0        198.8    174.4
                                       --------  --------     -------- --------
   Total revenues (excluding net
    realized investment
    gains and losses)                   $310.1    $302.3       $625.1   $604.4
                                       ========  ========     ======== ========


<PAGE>
                                       Three Months Ended     Six Months Ended
                                            June 30                June 30
                                       ------------------    ------------------
                                         1999      1998        1999      1998
                                       --------  --------    --------  --------
 Income before income taxes:
  Annuity:
   Income before amortization of
    intangible assets                    $42.7     $38.5       $84.9     $75.1
   Amortization of intangible assets      (0.3)     (0.3)       (0.6)     (0.6)
                                       --------  --------    --------  --------
    Subtotal annuity                      42.4      38.2        84.3      74.5
                                       --------  --------    --------  --------
  Asset management:
   Income before amortization of
    intangible assets                    21.2      21.4        43.2      42.8
   Amortization of intangible assets     (4.8)     (3.3)       (9.4)     (6.4)
                                      --------  --------    --------  --------
    Subtotal asset management            16.4      18.1        33.8      36.4
                                      --------  --------    --------  --------
  Other:
   Loss before amortization of
    intangible assets                   (11.2)    (10.4)      (23.3)    (21.7)
   Amortization of intangible assets      0.0       0.0        (0.1)     (0.1)
                                      --------  --------    --------  --------
    Subtotal other                      (11.2)    (10.4)      (23.4)    (21.8)
                                       --------  --------    --------  --------
  Income before net realized
   investment gains (losses)
   and income taxes                      47.6      45.9        94.7      89.1
  Net realized investment gains
   (losses)                             (11.6)     (2.4)      (14.7)     (0.2)
                                      --------  --------    --------  --------
   Total income before income taxes     $36.0     $43.5       $80.0     $88.9
                                      ========  ========    ========  ========

3.    Investments

      Investments were comprised of the following (in millions):

                                                June 30     December 31
                                                 1999          1998
                                             -----------   ------------
         Fixed maturities                     $11,268.9      $11,277.2
         Equity securities                         23.0           24.6
         Policy loans                             587.1          578.9
         Other invested assets                    981.6          717.6
                                             -----------   ------------
           Total                              $12,860.6      $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        Six Months Ended
                                         June 30                June 30
                                ----------------------- ------------------------
                                    1999       1998        1999         1998
                                ----------- ----------- -----------  -----------
Numerator (in millions)
 Net income                           $23.3      $29.7       $50.7        $61.2
 Less: preferred stock dividends       (0.3)      (0.3)       (0.5)        (0.5)
                                ----------- ----------- -----------  -----------
 Numerator for net income per
  share - basic - income available
  to common stockholders              23.0        29.4        50.2         60.7
 Plus: income impact of
  assumed conversions
   Preferred stock dividends           0.3         0.3         0.5          0.5
                                ----------- ----------- -----------  -----------
  Numerator for net income
   per share - assuming dilution
   - income available to common
   stockholders after assumed
   conversions                       $23.3       $29.7       $50.7        $61.2
Denominator
  Denominator for net income
   per share - basic -
   weighted-average shares      46,591,115  45,136,599  46,464,123   44,943,104
Effect of dilutive securities:
  Employee stock options           673,304   1,726,855     676,460    1,805,931
  Convertible preferred stock      514,370     516,335     514,370      516,902
  Common stock issuable as
   contingent purchase price        35,883         0.0      25,090          0.0
                                ----------- ----------- -----------  -----------
Dilutive potential common shares 1,223,557   2,243,190   1,215,920    2,322,833
                                ----------- ----------- -----------  -----------
   Denominator for net income per
    share - assuming dilution   47,814,672  47,379,789  47,680,043   47,265,937
                                =========== =========== ===========  ===========
Net income per share - basic         $0.49       $0.65       $1.08        $1.35
                                =========== =========== ===========  ===========
Net income per share - assuming
  dilution                           $0.49       $0.63       $1.06        $1.29
                                =========== =========== ===========  ===========

5.  Comprehensive Income (Loss)

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

                                       Three Months Ended     Six Months Ended
                                             June 30              June 30
                                       -------------------   ------------------
                                         1999       1998       1999      1998
                                       --------  ---------   --------  --------
  Net income                             $23.3      $29.7      $50.7     $61.2
  Other comprehensive income (loss),
   net of tax:
    Change in net unrealized investment
     gains (losses)                      (38.0)      (2.4)     (46.5)      2.5
                                       --------  ---------   --------  --------
  Comprehensive income (loss)           $(14.7)     $27.3       $4.2     $63.7
                                       ========  =========   ========  ========

<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.  The rule 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 $23.3  million or $0.49 per share for the  quarter  ended June
30, 1999 compared to $29.7 million or $0.63 per share for the quarter ended June
30,  1998.  For the first six months of 1999,  net  income was $50.7  million or
$1.06 per share  compared to $61.2  million or $1.29 per share for the first six
months of 1998.  These  decreases  resulted  largely  from  higher net  realized
investment  losses in 1999 compared to 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 the quarter ended June 30, 1999 compared to the quarter ended June 30, 1998,
and  increased for the first six months of 1999 compared to the first six months
of 1998.  However,  the  effective  tax rate was  significantly  higher  in 1999
compared to 1998.

   Pre-tax Income was $36.0 million for the quarter ended June 30, 1999 compared
to $43.5 million for the quarter  ended June 30, 1998.  For the first six months
of 1999,  pre-tax  income was $80.0  million  compared to $88.9  million for the
first six months of 1998.  These  decreases  resulted  largely  from  higher net
realized  investment  losses  in 1999  compared  to  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 $67.7 million for the quarter ended June 30, 1999 compared
to $62.1  million for the quarter  ended June 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 June 30, 1999 was 1.90%  compared to 1.76% for
the quarter  ended June 30, 1998.  For the first six months of 1999,  investment
spread was $139.1 million compared to $127.4 million for the first six months of
1998.  The  investment  spread  percentage was 1.95% for the first six months of
1999 compared to 1.82% for the first six months of 1998.

   Investment  income was $197.1  million  for the  quarter  ended June 30, 1999
compared to $202.3  million for the quarter ended June 30, 1998. The decrease of
$5.2  million in 1999  compared  to 1998  primarily  relates  to a $9.0  million
decrease resulting from a lower average investment yield,  partially offset by a
$3.8  million  increase  as a result of the  higher  level of  average  invested
assets.  The 1999  investment  income was net of $19.4  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
6.08% for the  quarter  ended June 30,  1999  compared  to 6.37% for the quarter
ended June 30,  1998.  For the first six months of 1999,  investment  income was
$403.3 million  compared to $409.7 million for the first six months of 1998. The
decrease of $6.4 million in 1999 compared to 1998 primarily  relates to an $18.0
million  decrease  resulting from a lower average  investment  yield,  partially
offset by an $11.6  million  increase as a result of the higher level of average
invested assets.  The 1999 investment income was net of $38.8 million of S&P 500
Index call option amortization  expense related to the Company's  equity-indexed
annuities  compared to $35.2 million in 1998. The average  investment  yield was
6.20%  for the  first six  months  of 1999  compared  to 6.48% for the first six
months of 1998.

   Interest  credited to  policyholders  totaled  $129.4 million for the quarter
ended June 30, 1999  compared to $140.2  million for the quarter  ended June 30,
1998. The decrease of $10.8 million in 1999 compared to 1998  primarily  relates
to a $13.2 million  decrease  resulting from a lower average  interest  credited
rate,  partially offset by a $2.4 million increase as a result of a higher level
of average policyholder  balances.  Policyholder balances averaged $12.4 billion
(including  $10.2 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 June 30, 1999 compared to $12.2
billion  (including  $10.4  billion  of  fixed  products  and  $1.8  billion  of
equity-indexed  annuities)  for the  quarter  ended June 30,  1998.  The average
interest  credited  rate  was  4.18%  (4.98%  on  fixed  products  and  0.85% on
equity-indexed  annuities) for the quarter ended June 30, 1999 compared to 4.61%
(5.31% on fixed products and 0.85% on equity-indexed  annuities) for the quarter
ended June 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 30% 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 six months of
1999,  interest  credited to  policyholders  totaled $264.2 million  compared to
$282.3  million for the first six months of 1998.  The decrease of $18.1 million
in 1999 compared to 1998 primarily relates to a $24.4 million decrease resulting
from a lower average interest credited rate,  partially offset by a $6.3 million
increase  as a  result  of a  higher  level of  average  policyholder  balances.
Policyholder  balances averaged $12.4 billion  (including $10.3 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 six months of 1999 compared to $12.1 billion  (including  $10.4 billion of
fixed products and $1.7 billion of  equity-indexed  annuities) for the first six
months of 1998.  The average  interest  credited  rate was 4.25% (5.00% on fixed
products and 0.85% on equity-indexed annuities) for the first six months of 1999
compared  to  4.66%  (5.31%  on  fixed  products  and  0.85%  on  equity-indexed
annuities) for the first six 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 $13.0 billion for the
quarter ended June 30, 1999 compared to $12.7 billion for the quarter ended June
30, 1998. For the first six months of 1999, such average  investments were $13.0
billion  compared  to $12.7  billion  for the  first six  months of 1998.  These
increases were primarily due to the  reinvestment of portfolio  earnings for the
twelve months ended June 30, 1999.

   Net Realized  Investment Losses were $11.6 million for the quarter ended June
30, 1999 compared to $2.4 million for the quarter  ended June 30, 1998.  For the
first six months of 1999,  net  realized  investment  losses were $14.7  million
compared  to $0.2  million  for the first six months of 1998.  The net  realized
investment  losses in 1999  included  losses of $3.0  million 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 June 30, 1999 compared to $59.3 million for the quarter ended
June 30,  1998.  For the  first  six  months of 1999,  investment  advisory  and
administrative fees were $134.4 million compared to $116.1 million for the first
six 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 $48.1 billion for the quarter
ended June  30, 1999 compared to $40.7  billion  for the quarter  ended June 30,
1998.  For the  first  six  months  of  1999,  average  fee-based  assets  under
management were $47.8 billion compared to $40.0 billion for the first six months
of  1998.   These   increases   during  1999  compared  to  1998  resulted  from
acquisitions, market appreciation and net sales for the twelve months ended June
30, 1999.  Investment  advisory and administrative  fees were 0.57% and 0.58% of
average  fee-based  assets under management for the quarters ended June 30, 1999
and  1998,  respectively.  For the  first  six  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).

Fee-Based Assets Under Management

                                                                As of June 30
                                                           ---------------------
                                                              1999        1998
                                                           ---------   ---------
 Mutual Funds:
   Intermediary-distributed                                   $18.3       $16.6
   Direct-marketed                                              6.6         7.5
   Closed-end                                                   2.4         2.4
   Variable annuity                                             1.8         1.4
                                                           ---------   ---------
                                                               29.1        27.9
 Private Capital Management                                     8.5         7.4
 Institutional                                                 11.5         5.7
                                                           ---------   ---------
 Total Fee-Based Assets Under Management*                     $49.1       $41.0
                                                           =========   =========
--------------
*  As of June 30, 1999 and 1998, Keyport's insurance assets of $13.6 billion and
    $13.1  billion, respectively,  bring total assets under  management to $62.7
    billion and $54.1 billion, respectively.

 Changes in Fee-Based Assets Under Management

                                        Three Months Ended     Six Months Ended
                                             June 30                June 30
                                        -------------------    -----------------
                                           1999      1998        1999     1998
                                        --------- ---------    -------- --------
Fee-based assets under management
 - beginning                               $47.4     $40.8       $47.9    $38.7
Sales and reinvestments                      3.2       2.2         5.8      4.1
Redemptions and withdrawals                 (2.9)     (1.4)       (5.8)    (3.1)
Market appreciation (depreciation)           1.4      (0.6)        1.2      1.3
                                         --------- ---------   -------- --------
Fee-based assets under management
 - ending                                  $49.1     $41.0       $49.1   $41.0
                                         ========= =========   ======== ========

   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 June 30, 1999 compared to $13.2 million for the quarter ended
June 30, 1998. For the first six months of 1999,  distribution  and service fees
were $30.0  million  compared to $25.8 million for the first six 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
0.32% for the quarters ended June 30, 1999 and 1998, respectively. For the first
six  months  of  1999  and  1998,  such   percentages   were  0.34%  and  0.31%,
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 $12.8 million on average  assets of $26.3 billion for the
quarter ended June 30, 1999 and $12.5 million on average assets of $25.5 billion
for the quarter ended June 30, 1998. For the first six months of 1999,  transfer
agency  fees were $25.7  million on average  assets of $26.2  billion  and $24.7
million on average  assets of $25.2 billion for the first six months of 1998. As
a percentage of total average assets under management, transfer agency fees were
approximately  0.19% and 0.20% for the  quarters  ended June 30,  1999 and 1998,
respectively.  For  each  of the  first  six  months  of  1999  and  1998,  such
percentages were 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 $9.0 million for the quarter ended
June 30, 1999 compared to $9.6 million for the quarter ended June 30, 1998.  For
the first six months of 1999,  total surrender  charges and net commissions were
$17.4 million compared to $18.0 million for the first six 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 $6.0 million for the quarter
ended June 30, 1999 and $6.5 million for the quarter  ended June 30,  1998.  For
the first six months of 1999,  surrender  charges were $11.5 million compared to
$11.8  million  for the first  six  months of 1998.  Total  annuity  withdrawals
represented  15.0% and  14.7% of the  total  average  annuity  policyholder  and
separate  account  balances  for the  quarters  ended  June 30,  1999 and  1998,
respectively.  For the first six  months  of 1999 and  1998,  the  corresponding
percentages  were  14.0% and  14.4%,  respectively.  Net  commissions  were $3.0
million  for the quarter  ended June 30,  1999 and $3.1  million for the quarter
ended June 30, 1998. For the first six months of 1999, net commissions were $5.9
million compared to $6.2 million for the first six 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 $7.7 million for the quarter ended June 30, 1999
compared to $5.4 million for the quarter ended June 30, 1998.  For the first six
months of 1999,  separate  account  fees were $14.3  million  compared  to $10.1
million for the first six months of 1998. Such fees represented  1.26% and 1.51%
of average  institutional, variable  annuity and variable life separate  account
balances for the quarters  ended June 30, 1999 and 1998,  respectively.  For the
first six  months of 1999 and  1998,  such  percentages  were  1.27% and  1.47%,
respectively.

   Operating Expenses primarily  represent  compensation,  marketing,  and other
general and administrative  expenses.  These expenses were $90.5 million for the
quarter ended June 30, 1999 compared to $80.1 million for the quarter ended June
30,  1998.  For the first six months of 1999,  operating  expenses  were  $179.2
million  compared  to $160.0  million  for the first six  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 0.59% for the quarter ended June
30, 1999  compared to 0.60% for the quarter  ended June 30, 1998.  For the first
six  months  of  1999  and  1998,  such   percentages   were  0.59%  and  0.61%,
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 $20.1
million for the quarter  ended June 30, 1999  compared to $18.3  million for the
quarter ended June 30, 1998. For the first six months of 1999,  amortization  of
deferred policy  acquisition  costs was $42.1 million  compared to $37.3 million
for the first six 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 26.7% and
27.1% of investment spread and separate account fees for the quarters ended June
30, 1999 and 1998, respectively.  For the first six months of 1999 and 1998, the
corresponding percentages were 27.4% and 27.1%, 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 $9.7 million for the quarter ended June 30, 1999
compared to $9.1 million for the quarter ended June 30, 1998.  For the first six
months of 1999,  amortization of deferred  distribution  costs was $19.2 million
compared  to $18.1  million  for the first six 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   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 $2.4 million
for the  quarter  ended June 30, 1999  compared to $1.2  million for the quarter
ended June 30, 1998. For the first six months of 1999,  amortization of value of
insurance in force was $4.6  million  compared to $2.7 million for the first six
months of 1998.

   Amortization   of   Intangible   Assets   relates  to  goodwill  and  certain
identifiable  intangible assets arising from business combinations accounted for
as purchases.  Amortization was $5.1 million for the quarter ended June 30, 1999
compared to $3.6 million for the quarter ended June 30, 1998.  For the first six
months of 1999,  amortization of intangible assets was $10.1 million compared to
$7.1 million for the first six 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 $5.3 million for the quarter ended June 30, 1999
compared to $3.9 million for the quarter ended June 30, 1998.  For the first six
months of 1999, interest espense, net was $11.0 million compared to $7.8 million
for the first  six  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 $3.8 million and $1.2 million for the quarters ending
June 30, 1999 and 1998, respectively. For the first six months of 1999 and 1998,
interest  expense was net of interest  income of $6.9 million and $2.5  million,
respectively.

   Income Tax  Expense  was $12.7  million  or 35.3% of  pre-tax  income for the
quarter  ended June 30,  1999  compared  to $13.8  million,  or 31.7% of pre-tax
income for the quarter  ended June 30,  1998.  For the first six months of 1999,
income tax  expense  was $29.3  million or 36.6% of pre-tax  income  compared to
$27.7 million,  or 31.2% of pre-tax income for the first six 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 as of June 30, 1999 was $1.28 billion compared to $1.27
billion as of December 31, 1998. Net income for the first six months of 1999 was
$50.7  million and cash  dividends on the  Company's  preferred and common stock
totaled  $3.2  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, value of insurance in force and income taxes, during the period decreased
stockholders' equity by $46.5 million.

   Book Value Per Share  amounted to $27.14 at June 30, 1999  compared to $27.41
at December 31, 1998.  Excluding net unrealized  gains or losses on investments,
book value per share  amounted to $27.55 at June 30, 1999 and $26.82 at December
31, 1998. As of June 30, 1999, there were 47.0 million common shares outstanding
compared to 46.4 million shares as of December 31, 1998.

   Investments not including cash and cash equivalents, totaled $12.9 billion at
June 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 June 30, 1999 and December 31,
1998  reflected net  unrealized  gains  (losses) of $(117.6)  million and $105.3
million, respectively, relating to its fixed maturity and equity portfolios.

   Approximately  $11.5 billion,  or 82.6%, of the Company's general account and
certain separate account  investments at June 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 June 30, 1999, the carrying value of investments in
below  investment  grade  securities  represented  8.9% 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 June 30, 1999,  the carrying  value of fixed  maturity  securities  that were
non-income producing was $18.2 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 59 and 42 outstanding  interest rate
swap agreements with an aggregate  notional principal amount of $2.7 billion and
$2.4 billion as of June 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 June 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 $673.4  million and $535.7 million as of June 30, 1999 and December 31,
1998,  respectively.  The Company had  futures  with a carrying  value of $(4.9)
million  and  $(0.6)  million  as of  June  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. The rule 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 June 30, 1999,  the interest paid on borrowings  under the Facility
was at the rate of 5.31% 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 June 30, 1999, the amount of dividends that Keyport could
pay without such approval was $49.1  million.  Keyport paid  dividends  totaling
$10.0 million during the second quarter 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 June 30, 1999, $10.3 billion, or 73.8% 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  77.6% of the Company's fixed annuity  policyholder  balances were
subject to surrender charges or restrictions as of June 30, 1999.

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.
The Company relies  significantly  on computer  systems and  applications in its
operations.  To the extent that these  systems are not Year 2000  compliant  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  substantially  complete and is
currently  in  the  final  testing  phase.   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 1999.

   The Company has initiated  communication  with third parties to determine the
extent to which the Company's  systems are  vulnerable  to those third  parties'
failure to remediate their own Year 2000 issues.  The Company received  feedback
from such parties and is in the process of  requesting  confirmation  from these
parties with respect to remediation of their Year 2000 issues.

   The Company is developing,  and will continue to develop,  contingency  plans
for  dealing  with  adverse  effects  that are known in the event the  Company's
remediation  plans are not  successful or third parties fail to remediate  their
own Year 2000 issues.  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, 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.

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 six 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 4.  Submission of Matters to a Vote of Security Holders

   The Annual  Meeting of  Stockholders  was held on May 10, 1999. The following
matters were voted upon at the meeting:

1.       Election of the following individuals as directors of the Company for a
         term of three years:

            William F. Connell
            For:        46,137,719
            Withheld:       88,475

            Paul J. Darling, II
            For:        46,137,719
            Withheld:       88,475

            Thomas J. May
            For:        46,134,714
            Withheld:       91,480

            Dr. Kenneth L. Rose
            For:        46,134,714
            Withheld:       91,480


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 June 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:   August 12, 1999

<PAGE>

                                  Exhibit Index


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

     12      Statement re Computation of Ratios
     27      Financial Data Schedule