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, 1997
            
                                       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 0-27736


                             DIGNITY PARTNERS, INC.
                             -------------------------
             (Exact name of registrant as specified in its charter)
                
                 Delaware                                94-3165263
                 --------                                -----------
                                
             (State or other jurisdiction of            (I.R.S. Employer
              incorporation or organization)           Identification Number)

              1700 Montgomery Street, Suite 250
              ----------------------------------
              San Francisco, California                     94111
              --------------------------------              -----
             (Address of principal executive offices)      (Zip Code)        
                 

                                 (415) 394-9467
              (Registrant's telephone number, including area code)



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. Yes [X] No [ ]


At April 30, 1997, there were 3,653,324 shares of the registrant's  Common Stock
outstanding.


<PAGE>




                             DIGNITY PARTNERS, INC.
                             ----------------------

                                     INDEX
                                     ------ 


                                                                
                                                                                
                                                                  Page #
                                                                  ======
Part I
=====

Item 1.  Consolidated Financial Statements:

            Consolidated Balance Sheets
                March 31, 1997 and December 31, 1996                 1

            Consolidated Statements of Operations for the
                Three Months Ended March 31, 1997 and 1996           2


            Consolidated Statements of Cash Flows for the 
                Three Months Ended March 31, 1997 and 1996           3

            Condensed Notes to Consolidated Financial Statements    4 - 8
 


Item 2.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations                     9 - 13


Part II

Item 1.  Legal Proceedings                                           14

Item 6.  Exhibits and Reports on Form 8-K                            14


Signatures
----------                                                           15

                                       (i)
  
<PAGE>



                                                 DIGNITY PARTNERS, INC.

                                               CONSOLIDATED BALANCE SHEETS
                                          March 31, 1997 and December 31, 1996
<TABLE>
<CAPTION>


                                                                                   March 31,            December 31,
                                  ASSETS                                             1997                   1996
                                                                              --------------------   --------------------
<S>                                                                                    <C>                     <C>


Cash and cash equivalents                                                   $          14,182,081  $           6,586,447
Restricted cash (note 6)                                                                4,335,177              4,625,663
Investment securities (fair value: $2,205,000) (note 2)                                 2,275,583                     --
Matured policies receivable (note 6)                                                      305,115              1,181,513
Assets held for sale (note 3)                                                           3,365,846             11,520,103
Purchased life insurance policies (note 4)                                             39,017,973             41,246,239
Investment in convertible preferred shares (note 5)                                     1,864,128              3,000,000
Deferred financing costs, net of accumulated amortization of
           $440,116 and $381,690, respectively (note 4 and 6)                             628,484                681,910
Other assets                                                                              211,322                102,598
                                                                              --------------------   --------------------

           Total assets                                                     $          66,185,709  $          68,944,473
                                                                              ====================   ====================

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued expenses                                                            $             195,678  $             190,894
Accounts payable                                                                          678,058                320,577
Accrued compensation payable                                                               64,971                186,390
Payable for policies purchased                                                                 --                427,553
Reserve for equity interest in wholly owned financing
           subsidiary (note 4)                                                          5,256,839              6,452,589
Long term notes payable  (note 6)                                                      39,084,011             41,218,205
Deferred income taxes  (note 7)                                                             6,000                  6,000
                                                                              --------------------   --------------------

           Total                                                                       45,285,557             48,802,208
           liabilities
                                                                              --------------------   --------------------

Stockholders' equity:
           Common stock, $0.01 par value; 15,000,000 authorized shares,
                4,291,824 and 4,291,824 shares, respectively,
                issued and outstanding                                                     42,918                 42,918
           Additional paid-in-capital                                                  29,496,720             29,496,720
           Retained earnings (deficit)                                                (7,912,173)            (9,007,373)
           Treasury stock, 273,500 and 145,000 shares,
                respectively (note 8)                                                   (727,313)              (390,000)
                                                                              --------------------   --------------------

           Total stockholders' equity                                                  20,900,152             20,142,265
                                                                              --------------------   --------------------

           Total liabilities and stockholders' equity                       $          66,185,709  $          68,944,473
                                                                              ====================   ====================

<FN>

  See accompanying condensed notes to consolidated financial statements.

</FN>
</TABLE>

                                       1

<PAGE>


                                       DIGNITY PARTNERS, INC.

                                CONSOLIDATED STATEMENTS OF OPERATIONS
                         For the Three Months Ended March 31, 1997 and 1996

<TABLE>
<CAPTION>
    

                                                                          Three Months Ended
                                                                               March 31,
     
<S>                                                                <C>               <C> 
                                                                          1997             1996
                                                                   ----------------  ----------------
Income:
     Earned discounts on life insurance policies (note 9)                       --         1,812,601
     Earned discounts on matured policies (note 9)                         184,286                --
     Interest income                                                       207,636           174,994
     Gain on sale of convertible preferred shares (note 5)                 699,665                --
     Net gain on assets sold (note 3)                                      870,641                --
     Other                                                                  31,194           130,726
                                                                   ----------------  ---------------
           Total income                                                  1,993,422         2,118,321

Expenses:
     Interest expense                                                      938,470         1,007,753
     Compensation and benefits                                             270,283           319,035
     Other general and administrative expenses                             565,736           220,376
     Amortization                                                           58,426            87,793
     Depreciation                                                               --             9,949
                                                                   ----------------  ----------------
           Total expenses                                                1,832,915         1,644,906
                                                                   ----------------  ----------------

           Income before income taxes and net loss in
              wholly owned financing subsidiary charged to
              reserve for equity interest                                  160,507           473,415

Income tax expense (note 7)                                                     --         (179,898)

Net loss in wholly owned financing subsidiary charged
     to reserve for equity interest (note 4)                               934,693                --

                                                                   ================  ================
           Net income                                           $        1,095,200 $         293,517
                                                                   ================  ================


Net income per share (note 8)                                                 0.27              0.10

Weighted average number of shares of common stock
     and common stock equivalents outstanding (note 8)                   4,108,991         3,089,467



<FN>
See accompanying condensed notes to consolidated financial statements.

</FN>
</TABLE>

                                      2

<PAGE>


                                                DIGNITY PARTNERS, INC.

                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                              For the Three Months Ended March 31, 1997 and 1996

<TABLE>
<CAPTION>

                                                                                        Three Months Ended
                                                                                             March 31,
                                                                                    1997                   1996
                                                                            ---------------------   --------------------
<S>                                                                                     <C>                     <C>

Cash flows for operating activities:
    Net income                                                           $             1,095,200 $              293,517
    Adjustments to reconcile net income to net cash
         provided by operating activities:
          Depreciation and amortization                                                   58,426                 97,742
          Write-off of furniture and equipment                                                --                 12,303
          Net gain on assets sold                                                      (870,641)                     --
          Gain on sale of convertible preferred shares                                 (699,665)                     --
          Earned discounts on policies                                                 (184,286)            (1,812,601)
          Purchase of life insurance policies                                          (666,217)            (9,640,408)
          Collections on matured life insurance policies                               3,217,810              4,610,856
          Increase in unearned income                                                         --                 71,662
          Increase in other assets                                                     (108,723)               (180,046)
          Increase in deferred taxes                                                          --                179,898
          Increase in accrued expenses                                                     4,784                  1,021
          Increase (decrease) in accounts payable                                        357,481               (178,654)
          Increase in IPO financing costs payable                                             --                193,100
          Decrease in payable to related party                                                --             (1,482,170)
          Decrease in accrued compensation payable                                     (121,419)              (798,668)
          Decrease in reserve for equity interest in wholly
                    owned financing subsidiary                                         (934,693)                     --
                                                                            ---------------------   --------------------
                    Net cash provided by (used in) operating activities                1,148,057            (8,632,448) 
                                                                            ---------------------   --------------------

Cash flows from investing activities:
    Proceeds from sale of assets held for sale                                         9,073,644                      --
    Purchase of furniture and equipment                                                       --                 (5,994)
    Decrease (increase) in restricted cash                                               290,486               (530,592)
    Increase in marketable securities                                                (2,275,583)             (4,210,229)
    Proceeds from sale of convertible preferred shares                                 1,835,537                      --
                                                                            ---------------------   --------------------
                    Net cash provided by (used in) investing activities                8,924,084             (4,746,815)
                                                                            ---------------------   --------------------

Cash flows from financing activities:
    Proceeds from long term notes payable                                                     --               4,900,000
    Principal payments on long term notes payable                                    (2,134,194)                      --
    Proceeds from other long term debt                                                        --               2,065,025
    Principal payments on other long term debt                                                --              (3,509,295)
    Distribution to limited partners                                                          --                (534,347)
    Principal payment on loan from stockholder                                                --              (1,162,170)
    Proceeds from issuances of common stock                                                   --              25,362,790
    Purchase of treasury stock                                                         (337,313)                     --
    Increase in financing costs                                                          (5,000)                (10,000)
    Reimbursement of IPO financing costs                                                      --                750,000
                                                                            ---------------------   --------------------

                    Net cash provided by (used in) financing activities              (2,476,507)              27,862,003
                                                                            ---------------------   --------------------

                    Net increase in cash and cash equivalents                          7,595,634              14,482,740

Cash and cash equivalents, beginning of period                                         6,586,447               1,056,611
                                                                            ---------------------   --------------------

Cash and cash equivalents, end of period                                 $            14,182,081 $            15,539,351
                                                                            =====================   ====================

Supplemental disclosure of cash flow information:

    State taxes paid                                                     $                23,136 $                 5,693
                                                                            =====================   ====================

    Cash paid for interest                                               $               933,686 $             1,006,732
                                                                            =====================   ====================

<FN>

See accompanying condensed notes to consolidated financial statements.

</FN>
</TABLE>
                                       3

<PAGE>

                                    

                             DIGNITY PARTNERS, INC.
                             ----------------------

              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
              -----------------------------------------------------


1.       Basis of Presentation 
-        ---------------------         

         The unaudited  consolidated  financial  statements of Dignity Partners,
Inc. and its consolidated  entities ("Dignity  Partners" or the "Company") as of
March 31,  1997 and for the three  month  periods  ended March 31, 1997 and 1996
have been prepared in accordance with generally accepted  accounting  principles
for interim financial  information,  in accordance with Rule 10-01 of Regulation
S-X.  Accordingly,  such  statements do not include all of the  information  and
notes thereto that are included in the annual consolidated financial statements.
In the opinion of management,  all adjustments  considered  necessary for a fair
presentation  have been included.  Operating  results for the three month period
ended March 31, 1997 are not  indicative of the results that may be expected for
the entire 1997 fiscal year.  The balance sheet as of December 31, 1996 has been
derived from the audited  financial  statements of the Company.  The  statements
included  herein  should  be read in  conjunction  with  the  audited  financial
statements  and notes thereto  included in the  Company's  Annual Report on Form
10-K for the year ended December 31, 1996 (the "Form 10-K").

2.       Investment Securities
--       ----------------------

         The Company classifies  securities for which it has the positive intent
and ability to hold to maturity as held-to-maturity  securities. Such securities
are reported at amortized  cost. As of March 31, 1997 all investment  securities
were classified as held-to-maturity securities.

3.       Assets Held for Sale and Related Sale Agreements
--       ------------------------------------------------

         As a  result  of  the  Company's  decision  in  1996  to  sell  all  or
substantially  all of its assets,  it reclassified  all of its assets other than
the assets of its  wholly-owned  special purpose  subsidiary,  Dignity  Partners
Funding  Corp. I ("DPFC"),  to a  "held-for-sale"  category.  Accordingly,  such
assets are  recorded on the balance  sheet as of March 31, 1997 and December 31,
1996 at the lower of carrying  value or fair value less  estimated cost to sell.
In  connection  with the  decision to sell  assets,  the Company  established  a
reserve for loss on sale of assets during 1996. Assets held for sale consist of:
<TABLE>

                              Assets Held for Sale
                              ====================
<CAPTION>

                                      March 31, 1997          December 31, 1996
                                      --------------          -----------------
<S>                                    <C>                     <C>


  Capitalized costs                   $ 4,278,537                  14,089,124
  Earned discounts on life              
     insurance  policies                  192,554                     380,692
  Reserve for loss on sale             (1,105,245)                 (2,949,713)
                                       ------------             ------------
  Assets held for sale                $ 3,365,846                  11,520,103
                                      ============               ===========
</TABLE>


         The  calculation  of  reserve  for  loss  on sale of  assets  for  life
insurance  policies held for sale was calculated based on the life  expectancies
of the insureds under the policies in relation to prices obtained by the Company
in connection with other sales.  Any gain or loss due to the difference  between
actual  proceeds  (less any back end sourcing fees) and the carrying value after
giving  effect to the  reserve  for loss on sale of assets will be reported as a
realized gain or loss on assets sold at the time sale proceeds are received.

                                       4

<PAGE>

         On September 27, 1996,  the Company  entered into an agreement  with an
unaffiliated  viatical settlement company to sell 197 policies with an aggregate
face value of $14.2 million for an aggregate consideration of approximately $8.7
million.  The  Company  established  a reserve  in the third  quarter of 1996 of
$1,792,087 in connection with policies  covered by the sale  agreement.  Through
March 31, 1997,  182 policies with an aggregate  face value of $13.3 million had
been sold,  of which 46 policies  with an  aggregate  face value of $1.9 million
were  sold in the  fourth  quarter  of 1996  (resulting  in a  realized  gain of
$120,000)  and 136 policies  with an aggregate  face value of $11.4 million were
sold in the first  quarter of 1997  (resulting  in a realized gain of $426,000).
Seven  policies  covered by the sale agreement were not sold because the insured
died prior to the  issuing  insurance  company's  acknowledgment  of transfer of
ownership of the policy and the Company  collected the death benefit  instead of
selling those policies. As of March 31, 1997, the remaining eight policies (with
a face value of $420,000) were pending acknowledgment of transfer of ownership.

         On January 16, 1997 Dignity  Partners entered into an agreement with an
unaffiliated  viatical  settlement company to sell 18 policies with an aggregate
face value of $1.0  million  for  approximately  $710,000.  Such  policies  were
carried on the balance  sheet at December  31,  1996 at  approximately  $590,000
after  giving  effect to the  reserve  for loss on sale of assets.  In the first
quarter of 1997, the Company completed the sale of 17 policies with an aggregate
face value of $990,000  and  realized a gain of $121,000  associated  with these
policies.  As of March 31,  1997,  the  remaining  policy  with a face  value of
$25,000 was pending acknowledgment of transfer of ownership.

         On February 10, 1997 Dignity Partners entered into an agreement with an
unaffiliated  viatical  settlement company to sell 67 policies with an aggregate
face value of $4.5 million for  approximately  $3.0 million.  Such policies were
carried on the balance sheet at December 31, 1996 at approximately  $2.2 million
after  giving  effect to the  reserve  for loss on sale of assets.  In the first
quarter of 1997, the Company completed the sale of 35 policies with an aggregate
face value of $1.7 million and realized a gain of $295,000 associated with these
policies.  As of March 31, 1997,  the remaining 32 policies with a face value of
$2.8 million were pending acknowledgment of transfer of ownership.

         On March 24, 1997 Dignity  Partners  entered into an agreement  with an
unaffiliated  viatical  settlement company to sell 31 policies with a face value
of $2.9 million for  approximately  $1.7 million.  Such policies were carried on
the balance sheet at March 31, 1997 at  approximately  $1.5 million after giving
effect to the reserve for loss on sale of assets.

         The  policies  representing  "assets  held  for  sale"  consist  of the
policies  under the  aforementioned  sales  agreements  for which the Company is
awaiting the  acknowledgment  of the  transfer of  ownership  by the  applicable
insurance company and the payment therefore by the applicable purchaser.

4.       Purchased Life Insurance Policies
--       ---------------------------------

         Effective July 1996,  purchased life insurance  policies consisted only
of those  policies held by DPFC. The sale of policies held by DPFC, all of which
are pledged  under the  indenture  pursuant to which the  Securitized  Notes (as
defined in Note 6) were  issued,  requires  the consent of all of the holders of
the Securitized Notes ("Noteholders") and the Company. The Company has discussed
potential  sales of DPFC policies  with the  Noteholders;  however,  the Company
cannot  determine  whether the  Noteholders  and the Company will decide to sell
such policies or whether such a sale is feasible. A reserve was recorded in 1996
to reflect the estimated  loss of the Company's  equity  interest in DPFC. As of
March 31, 1997 the  reserve  was $5.3  million.  The  reserve  provides  for the
write-off  of  deferred  financing  costs  and  the  unrealized  residual  value
associated with DPFC.

                                       5

<PAGE>


5.       Investment In Convertible Preferred Shares
--       -------------------------------------------


         On  November  4, 1996,  the Company  purchased  21,517,100  convertible
preferred shares for $3.0 million  (representing  approximately 30% of the fully
converted  common  equity  interest)  in  American  Information  Company,   Inc.
("American  Information"),  a privately held company which,  among other things,
provides information  services to individuals owning or purchasing  automobiles.
The Company has an option, through September 1997, to purchase for approximately
$1.1  million  8.2  million  additional  shares  of  common  stock  of  American
Information. On March 18, 1997, the Company, following conversion of 8.2 million
shares of convertible preferred stock into 8.2 million shares of common stock of
American  Information,  sold such shares (approximately 38% of the Company's 30%
equity  investment in American  Information) to an unaffiliated  third party for
$1.83  million.   The  Company  recognized  a  $700,000  pre-tax  gain  on  this
transaction  in the first  quarter of 1997.  At March 18, 1997 the Company owned
approximately  14.7% of the equity of American  Information and the shares which
the Company is entitled to purchase under the option  represented  approximately
9.0% of the  equity  of  American  Information.  The  Company  accounts  for its
investment using the cost method.  If the equity method had been applied Dignity
Partners would have recorded a loss  associated with the investment in the first
quarter of 1997 of $279,000  which is equivalent to the Company's pro rata share
on an as if converted basis in American Information's first quarter loss.

6.       Long Term Notes Payable
--       -----------------------       

         The Senior Viatical  Settlement Notes,  Series 1995-A,  Stated Maturity
March 10, 2005 (the "Securitized Notes") issued by DPFC initially provided for a
maximum lending commitment of $50 million.  As a result of an early amortization
event in June 1996,  the  maximum  lending  commitment  was  reduced to the then
outstanding  principal  amount  ($45.5  million) and  principal  payments on the
Securitized  Notes  began in July 1996.  Principal and interest Payments on the 
Securitized Notes are payable solely from  collections on pledged  policies and 
deposited funds. The Securitized Notes are reported on the balance 
sheet as long term notes payable. The Securitized Notes bear a fixed interest 
rate of 9.17% per annum.

         The Securitized Notes represent the obligations  solely  of DPFC.  The
Company's consolidated financial statements include the assets,  liabilities and
operations  of  DPFC;  however,  the  assets  of DPFC are not  available  to pay
creditors  of  Dignity  Partners,  Inc.  The  assets of DPFC are the  beneficial
ownership  interests in the life  insurance  policies and funds which secure the
Securitized  Notes.  To the extent  that the book value of assets of DPFC become
less than the outstanding  balance of the Securitized Notes,  generally accepted
accounting principles nonetheless would require a loss to be recorded.  Upon the
retirement  or maturity  of the  Securitized  Notes,  under  generally  accepted
accounting  principles  the  Company  would  recognize  a gain equal to any such
losses  previously  recognized.  At March 31, 1997,  the  carrying  value of the
assets of DPFC were $43.5 million (consisting of $39.0 million in purchased life
insurance  policies,  $4.2 million in restricted  cash on deposit with a trustee
for the benefit of the Noteholders and $250,000 in matured policies receivable).
        
         Dignity Partners is the servicer of the policies pledged under the 
indenture pursuant to which the Securitiezed Notes were issued and incurs 
servicing expenses (which are reimbursed, subject to certain priority payments)
in connection therewith.

                                       6
<PAGE>


7.       Deferred Income Taxes
--       ----------------------

         Prior to  September  30,  1996,  the Company had  provided for deferred
income taxes related to income  accrued on purchased  life  insurance  policies.
Because these policies had been sold, or were anticipated to be sold, at a loss,
the Company  determined  that the deferred tax liability  associated  with these
policies is not  required.  The Company has  provided  for  miscellaneous  state
income tax liabilities expected to be incurred.  For the year ended December 31,
1996,  the Company had a deferred  tax asset  resulting  primarily  from tax net
operating loss  carryforwards.  A valuation  allowance was established to reduce
the amount of the gross  deferred  tax asset to that  amount  deemed more likely
than not to be utilized.
                                     
         In the quarter ended March 31, 1997, the Company's provision for income
taxes  was  offset  by  a  reduction  in  the  valuation  allowance   previously
established. The valuation allowance has been reduced to reflect that portion of
the  deferred  tax asset which will more  likely  than not be utilized  based on
anticipated earnings for the year ending December 31, 1997.

8.       Common Stock
--       -------------

         Changes in  stockholders' equity during the first three months of 1997
reflected the following:
<TABLE>
<S>                                                             <C>


             Stockholders' equity, beginning of period         $ 20,142,265
                   Net income                                     1,095,200
                   Treasury stock                                  (337,313)
                                                                -------------
             Stockholders' equity, end of period               $ 20,900,152
                                                               ==============
</TABLE>


         In October 1996, the Board of Directors of the Company approved a share
repurchase  program pursuant to which the Company is authorized to purchase from
time to time up to 1 million shares of Common Stock at prevailing market prices.
Through March 31, 1997, the Company had purchased 273,500 shares of Common Stock
pursuant to the program at a weighted average price of $2.66 per share. See also
Note 10b.

         The Company will  implement  the  provisions  of Statement of Financial
Accounting  Standards No. 128, Earnings per Share ("Statement  128"), which will
be  effective  for interim and annual  financial  statements  issued for periods
ending after December 15, 1997.  Statement 128 simplifies the previous standards
for computing earnings per share ("EPS"),  replacing the presentation of primary
EPS with a  presentation  of basic EPS. It also  requires dual  presentation  of
basic and diluted EPS on the face of the income statement for all entities with
complex capital structures, which applies to the Company.

9.       Earned Discounts
--       -----------------

         Earned  discounts  on life  insurance  policies  reflects the amount of
accretion  recorded in the first quarter of 1996. As a result of the decision to
sell all or substantially  all of the Company's assets any income is recorded as
earned discounts for matured policies only and recorded upon receipt of proceeds
of policies (pursuant to the death of the insured). Earned discounts for matured
policies  reflects  the first  quarter  income in 1997 on  policies on which the
Company collected the proceeds (pursuant to the death of the insured).

                                       7

<PAGE>

10.      Events Subsequent to the Balance Sheet Date
--       --------------------------------------------

         a. Portfolio Sales

         During the second quarter of 1997,  the Company  expects to collect all
proceeds  on the  remaining  eight  policies  under  the  sale  agreement  dated
September 27, 1996 and the one remaining  policy under the sale agreement  dated
January 16, 1997,  each  described in Note 3. The  estimated  pre-tax gain under
these  agreements  in the second  quarter of 1997 is $18,000.  The Company  also
expects  to  collect  during the  second  quarter  of 1997 all  proceeds  on the
remaining 32 policies under the sale  agreement  dated February 10, 1997 and the
remaining  30  policies  under the sale  agreement  dated March 24,  1997,  each
described in Note 3. The  estimated  pre-tax gain under these  agreements in the
second quarter of 1997 is $430,000 and $190,000, respectively.  Actual gains may
vary materially  from estimated  gains based on, among other things,  the actual
timing of the transfer of ownership of the policies and actual versus  estimated
proceeds.
                                    
         b. Share Repurchase

         In the month of April 1997, the Company purchased 365,000 shares of its
common stock pursuant to its previously authorized share repurchase program at a
weighted average price of $2.59 per share. See Note 8.

                                       8


<PAGE>


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

         The  following  is  a  discussion  and  analysis  of  the  consolidated
financial  condition  of the  Company as of March 31, 1997 and of the results of
operations  for the Company for the three  months ended March 31, 1997 and 1996,
and of  certain  factors  that may affect the  Company's  prospective  financial
condition and results of operations. The following should be read in conjunction
with the unaudited consolidated financial statements and related notes appearing
elsewhere   herein.   For  the   reasons   set  forth   below   (including   the
reclassification  into  "assets held for sale" of a  substantial  portion of the
Company's  assets in 1996 and related  accounting  consequences),  the Company's
results of  operations  and cash flows for the quarter  ended March 31, 1997 are
not comparable to those for the quarter ended March 31, 1996.

Overview
--------

         Dignity  Partners  is  a  specialty  financial  services  company.  The
Company's  financial   statements   consolidate  the  assets,   liabilities  and
operations  of DPFC,  the  Company's  wholly-owned  special  purpose  subsidiary
through which the Company issued the  Securitized  Notes.  See the Form 10-K and
Notes  4 and 6 of the  Condensed  Notes  to  Consolidated  Financial  Statements
(contained herein) for further information regarding DPFC.

Cessation of Viatical Settlement Business; Sale of Assets
---------------------------------------------------------

        The principal business activity of the Company through February 1997 was
to  provide  viatical   settlements  for  terminally  ill  persons.  A  viatical
settlement  is the payment of cash in return for an  ownership  interest in, and
right to receive the death benefit (face value) from, a life insurance policy.

         On July  16,  1996 the  Company  announced  that,  in light of the data
regarding new treatments  involving  combinations  of various drugs presented at
the  International  AIDS Conference held in Vancouver,  British Columbia in July
1996 (the "AIDS Conference"), the Company was temporarily ceasing processing new
applications for policies insuring individuals afflicted with AIDS and HIV while
it further analyzed the effects of such research results on its business and its
strategic options. See the Form 10-K for further information  regarding the AIDS
Conference.

         The  Company  decided  in the  third  quarter  of 1996  to sell  all or
substantially  all of its  assets.  As a result of such  decision,  the  Company
reclassified  all of its  assets  (other  than the  policies  held by DPFC) to a
"held-for-sale"  category  during the third quarter of 1996.  Accordingly,  such
assets are accounted for at the lower of carrying  value or fair value less cost
to sell.

         The Company sought and received on December 1996  stockholder  approval
to sell all or substantially all of its assets.

         Based  on the  Company's  evaluation  of the  effects  of the  research
results  reported  at the AIDS  Conference  and  subsequent  reports  and  other
information,  the Board of Directors in February  1997 approved the cessation of
the  viatical  settlement  business  and the sale by the Company of its non-AIDS
policies,  consisting  of  approximately  31 policies  with a face value of $2.9
million.  If the  Company is  successful  in  selling  such  policies,  the only
remaining policies will be those held by DPFC.

                                       9

<PAGE>


        Through  March 31, 1997 the Company had sold or entered into  agreements
to sell 373 policies, representing $29.2 million in aggregate face value, for an
aggregate  purchase  price of $19.5  million.  As a result of these  sales,  the
Company  reported  a pre-tax  loss of  $180,000  in 1996 and a  pre-tax  gain of
$871,000  in the first  quarter of 1997 (see  "Results  of  Operations  -- Three
Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996 -- Net
gain on assets  sold") and  expects to report a pre-tax  gain of $638,000 in the
second quarter of 1997.

Method of Accounting
--------------------

         Through  June  30,  1996,  the  Company   recognized   income  ("earned
discount") on each  purchased  policy by accruing,  over the period  between the
acquisition date of the policy and the Company's estimated date of collection of
the policy's face value (the "Accrual  Period"),  the difference  (the "unearned
discount")  between (a) the face value of the policy less the amount of fees, if
any, payable to a referral source upon collection of the face value, and (b) the
carrying  value of the policy.  The carrying value for each policy was reflected
on the Company's  consolidated  balance sheet under  "purchased  life  insurance
policies" and consisted of the purchase price,  other  capitalized costs and the
earned  discount on the policy  accrued to the balance sheet date.  See the Form
10-K  for  further   information   regarding   capitalized  costs  of  policies,
determination of Accrual Periods and changes thereto over time.

         As a result of the Company's  decision to sell all or substantially all
of its  assets,  the Company  established  a reserve in 1996 for loss on sale of
assets.  The Company also established a reserve for loss of the Company's equity
interest in DPFC during 1996  because of the  uncertainties  created by the data
presented at the AIDS  Conference and subsequent  reports of the efficacy of new
treatments for AIDS/HIV.  As of March 31, 1997,  such reserves were $1.1 million
and $5.3 million,  respectively.  In addition, beginning in the third quarter of
1996,  the Company  began  generally  recognizing  income on policies  only upon
receipt of  proceeds on  policies  (either  pursuant to sale or the death of the
insured). Such income is equal to the difference between such proceeds (less any
back-end  sourcing  fees) and the carrying  value of such policies  after giving
effect to any reserve  for loss on the sale of such  policies or any reserve for
loss of the Company's  equity interest in DPFC. See the Form 10-K and Note 4 and
6 of the  Condensed  Notes to  Consolidated  Financial  Statements  for  further
information regarding the reserve for loss on sale of assets.

Certain Accounting Implications for DPFC
----------------------------------------

         Under generally accepted accounting principles,  to the extent that the
carrying  value of the  assets of DPFC are less than the  carrying  value of its
liabilities,  the Company  would be  required  to  recognize a loss equal to the
amount  of such  difference,  notwithstanding  the  non-recourse  nature  of the
Securitized  Notes.  At March 31, 1997, the carrying value of the assets of DPFC
were $43.5 million (consisting of purchased life insurance policies,  restricted
cash and a portion of matured  policies  receivable)  and its  liabilities  were
$39.1  million  (consisting  of long term notes  payable,  i.e. the  Securitized
Notes).

         Although the  Securitized  Notes had an expected life of 2.1 years when
the aggregate  maximum  principal amount of the Securitized  Notes was increased
from $35 million to $50 million in September  1995, the Company does not believe
that the Securitized Notes will be retired through  collections by October 1997.
The Company  believes  that,  if the  Securitized  Notes are not retired by late
2001, the assets of DPFC will become less than its liabilities because the costs
of carrying the Securitized Notes,  including interest and servicing and trustee
fees, will deplete collections  available to repay principal.  In the event that
the collection experience for DPFC policies is substantially delayed, the assets
of DPFC may become less than its liabilities before late 2001.

                                       10
<PAGE>


         Additionally,  if the  collection  experience  for the DPFC policies is
substantially  delayed,  the value of the assets of DPFC may erode  further  for
some of the following reasons.  First, a decision to discontinue paying premiums
on some  policies  may be made because the present  value of the expected  death
benefit on some policies may be less than expected future premiums to be paid on
such policies.  Second,  the face value of certain  policies  (especially  group
term) may begin to  decrease as the people  whose  lives are insured  thereunder
reach specified age levels (often 65). Finally, policies for which the insurance
was continued under a disability  provision may be uneconomical to convert given
the  insured's  age and life  expectancy  if such  insured  person  is no longer
considered  disabled.  The Company cannot  determine at present  which,  if any,
policies held by DPFC would be so affected.

         In light of the  foregoing,  the Company  believes  that it is possible
that  the  Company  may,  in the  future  under  generally  accepted  accounting
principles,  be  required  to  recognize  a further  loss to the extent that the
carrying value of the assets of DPFC is less than its liabilities. However, when
the  Securitized  Notes are finally  discharged  or mature,  the  Company  under
generally  accepted  accounting  principles  would recognize a gain in an amount
equal to the aggregate  amount of any such losses  recognized.  The  Securitized
Notes  represent the obligations  solely of DPFC. The company did not guarantee
repayment of the Securitiezed Notes and is not required to fund any principal or
interest deficiencies thereunder.

Share Repurchase Program
-------------------------

         In October 1996, the Board of Directors of the Company approved a share
repurchase  program pursuant to which the Company is authorized to purchase from
time to time up to 1 million shares of Common Stock at prevailing market prices.
Through  April 30, 1997,  638,500  shares had been  repurchased  pursuant to the
program at a weighted average price of $2.62 per share.


Results of Operations
---------------------

Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
-------------------------------------------------------------------------------

         Earned Discounts. The Company currently recognizes earned discount only
upon  receipt of proceeds on policies  (pursuant  to the death of the  insured).
Consequently,  the  Company  did not  recognize  any  earned  discounts  on life
insurance  policies  during the first  quarter of 1997,  but instead  recognized
$184,000 of earned discounts on matured policies for such period. Such income is
equal to the  difference  between  the  proceeds  the  Company  received  on the
policies  (less  any back end  sourcing  fees)  and the  carrying  value of such
policies  after  giving  effect  to any  reserve  for  loss on the  sale of such
policies. See "Method of Accounting."

         In the first quarter of 1996 the Company  recognized earned discount on
each  purchased  policy by accruing,  over the Accrual  Period,  the  difference
between  (a) the face  value of the  policy  less the  amount  of fees,  if any,
payable to a referral  source upon  collection  of the face  value,  and (b) the
carrying value of the policy.  Earned  discounts on life insurance  policies was
$1.8 million for the quarter ended March 31, 1996. See "Method of Accounting."

         The Company purchased only three policies  (outstanding  commitments as
of  December  31,  1996) with an  aggregate  face value of  $145,000  during the
quarter  ended March 31, 1997  compared to the purchase of 148 policies  with an
aggregate  face value of $13.0 million  during the quarter ended March 31, 1996.
See "Cessation of Viatical Settlement Business; Sales of Assets."

                                       11

<PAGE>

         Interest  Income.  Interest income increased 18.7% in the first quarter
of 1997 compared to the first  quarter of 1996 as a result of the  investment of
the proceeds from the sale of policies in short term  securities  and marketable
securities.  Interest  income  generated  in  the  first  quarter  of  1996  was
essentially the result of the investment of the initial public offering proceeds
in the second half of the quarter.

         Gain on sale of convertible  preferred  shares. In the first quarter of
1997 the  Company  recognized  a  $700,000  gain on the sale of a portion of its
investment in American Information  Company,  Inc. On March 18, 1997 the Company
converted 8.2 million  shares of  convertible  preferred  stock into 8.2 million
shares of  common  stock of  American  Information  and sold  such  shares to an
unaffiliated  third party for $1.83  million.  The carrying value of such shares
was $1.1 million.  See Note 5 of the Condensed Notes to  Consolidated  Financial
Statements.

         Net gain on assets sold.  During the first quarter of 1997, the Company
collected the sales proceeds on 188 policies.  See Note 3 of the Condensed Notes
to Consolidated  Financial Statements.  The total net gain recorded in the first
quarter of 1997 in connection  with these sales was $871,000.  The realized gain
was  calculated  based  on the  difference  between  the sale  proceeds  and the
carrying value after giving effect to the reserve for loss on sale of assets.

         Other  Income.  Components  of  other  income  include  collections  on
policies of dividends, interest, paid-up cash values, increases in face value of
matured  policies  and  refunds of premiums on matured  policies.  Other  income
decreased  76.1% during the first  quarter of 1997 compared to the first quarter
of 1996 due to the sale of  policies  and a  decrease  in the  number of matured
policies.  A $50,000  increase  in face value on one  policy  was also  recorded
during the first quarter of 1996.

         Interest  Expense.  Interest  expense  in the  first  quarter  of  1997
decreased 6.9% relative to the first quarter of 1996 due mainly to the repayment
of the Company's  revolving credit facility in the second half of 1996.  Average
borrowings  under the  Securitized  Notes were $40.7  million in the first three
months of 1997 compared to $40.1 million in the first three months of 1996.
The interest rate on the Securitized Notes was 9.17% in both periods.

         Compensation and Benefits. Compensation and benefits decreased 15.3% in
the first quarter of 1997 compared to the first quarter of 1996. This was due to
the  reduction  in  staff  from  20 to 15  with  the  cessation  of  application
processing of new policies.

         Other   General  and   Administrative   Expenses.   Other  general  and
administrative  expenses  increased 156.7% in the first quarter of 1997 over the
first  quarter of 1996.  The increase is primarily a result of a $250,000  legal
reserve in the first quarter of 1997 in connection  with federal and state class
action  lawsuits filed against the Company and its officers and directors.  This
amount  represents the retention limit under the Company's  insurance  coverage.
The first three months of 1997 also  includes a $150,000  aggregate  increase in
expenses for general legal and professional  fees to support the activities of a
public company and the analysis of strategic options.

         Income Tax  Expense.  In the first  quarter of 1997 the Company did not
record an income tax expense on the income  statement  because the  deferred tax
asset of  $3,225,130  was  available  to offset any tax  liability.  The Company
adjusted its deferred tax asset,  liability and related allowance to reflect the
tax effect on the earnings for the quarter ended March 31, 1997.

                                       12

<PAGE>

         Net loss in wholly owned  financing  subsidiary  charged to reserve for
equity interest.  At December 31, 1996 the reserve to reflect the estimated loss
of the Company's  entire equity interest in DPFC was $6.5 million.  In the first
quarter of 1997, the DPFC net loss of $934,693 was included in the Company's net
loss  before  income  taxes and net loss in wholly  owned  financing  subsidiary
charged to reserve  for  equity  interest.  This loss was  charged  against  the
reserve for equity interest in wholly owned financing subsidiary.


Liquidity and Capital Resources
--------------------------------

         The Company does not currently  have an external  funding  source.  The
Securitized  Notes do not provide funds with which to fund operations.  At March
31, 1997, cash and cash equivalents was $14.2 million.  The Company is analyzing
its current  and future  needs for  financing,  which will be  dependent  on its
strategic  direction.  There  can be no  assurance  that  the  Company  will  be
successful in obtaining  external  financing on  satisfactory  terms assuming it
determines  it  needs  additional  funds.   However,   the  Company  at  present
anticipates  having  sufficient  liquidity  to  meet  its  working  capital  and
operational needs through 1997, using the cash generated by the sale of policies
(See Notes 3 and 10a of Condensed  Notes to Consolidated  Financial  Statements)
and by the  partial  sale  of  the  convertible  preferred  shares  of  American
Information   (See  Note  5  of  Condensed  Notes  to   Consolidated   Financial
Statements). Such needs may change significantly depending on strategic options.

         As  of  March  31,  1997,  the  outstanding  principal  amount  of  the
Securitized  Notes was $39.1 million.  Principal  repayments on the  Securitized
Notes began in July 1996. Principal and interest payments on the  Securitized  
Notes are payable solely from  collections on policies  pledged to secure the 
payment thereof and do not require the Company to expend  cash or obtain  
financing  to satisfy such principal and interest obligations.

 



Forward Looking Statements
--------------------------

         This report includes forward looking  statements  within the meaning of
the Private Securities Litigation Reform Act of 1995. All statements made herein
which are not based on historical  facts are forward  looking and,  accordingly,
involve  risks and  uncertainties  that  could  cause  actual  results to differ
materially from those discussed.  Such forward looking  statements include those
under  "Management's  Discussion and Analysis Of Financial Condition and Results
of  Operations"  relating  to (i)  expected  gains to be  reported in the second
quarter of 1997 on policies  subject to sales agreements (see the last paragraph
under  "Cessation  of Viatical  Settlements  Business;  Sale of  Assets"),  (ii)
expectations  regarding  whether and the time at which the carrying value of the
assets of DPFC  will be less than the  carrying  value of its  liabilities  (see
"Certain  Accounting  Implications  for  DPFC"),  and (iii)  sufficiency  of the
Company's   liquidity  and  capital   resources  (see   "Liquidity  and  Capital
Resources").  Such  statements are based on  management's  belief,  judgment and
analysis as well as assumptions made by and information  available to management
at the date  hereof.  In  addition to any  assumptions  and  cautionary  factors
referred to  specifically in this report in connection with such forward looking
statements,  factors that could cause actual results to differ  materially  from
those  contemplated by the forward looking statements include (i) the amount and
timing of actual  collections of sales  proceeds,  (ii) the amount and timing of
actual  collections of DPFC policies  following the death of the insured,  (iii)
the results of the Company's  consideration  of strategic  options and any costs
associated with a chosen option, and (iv) availability and cost of capital.

                                       13


<PAGE>


PART II.  OTHER INFORMATION
---------------------------



Item 1.  Legal Proceedings
---------------------------

         On February 13, 1997,  a complaint  was filed in the Superior  Court of
California, City and County of San Francisco (Docket No. 984643) against Dignity
Partners,  Inc.,  and each of its  executive  officers and The Echelon  Group of
Companies LLC (the Company's largest stockholder) by an individual purporting to
act on behalf of himself and an alleged class  consisting  of all  purchasers of
the Company's common stock during the period February 14, 1996 to July 16, 1996.
The  complaint  alleges  that  the  defendants  violated  section  25400  of the
California  Corporate Code and seeks to recover  damages.  The  allegations  are
based  on  alleged  misstatements,  concealment  and/or  misrepresentations  and
omissions of allegedly  material  information  in connection  with the Company's
initial public offering and subsequent disclosures.  The Company and each of the
defendants intend to defend the action vigorously.



Item 6.  Exhibits and Reports on Form 8-K
------------------------------------------


       (a)   Exhibits.

         Number          Description
         ------          ------------

          27             Financial Data Schedule



       (b)   Reports on Form 8-K.

         Date    Item Reported    Matter Reported
         ----    -------------    ----------------

       12/19/96    5              A complaint was filed against Dignity 
                                  Partners, Inc. and each of its directors by  
                                  three individuals purporting to act on behalf 
                                  of themselves and an alleged class consisting
                                  of purchasers of the Company's common stock 
                                  during the period February 14, 1996 to July 
                                  16, 1996.

                                       14

<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.



                                              DIGNITY  PARTNERS, INC.



DATED:  May 15, 1997                          /S/ ALAN B. PERPER                
                                              --------------------------------  
                                              ALAN  B.  PERPER 
                                              President
                                              (Duly Authorized Officer)




DATED:  May 15, 1997                          /S/ JOHN WARD ROTTER         
                                              -------------------------------- 
                                              JOHN WARD ROTTER
                                              Executive Vice President and
                                              Chief Financial Officer
                                             (Principal Financial and
                                              Accounting Officer)

                                       15