<PAGE>

================================================================================
                                  UNITED STATES
                       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

              [ ] 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 1-14373

                         INSIGNIA FINANCIAL GROUP, INC.
             (Exact Name of Registrant as Specified in Its Charter)

                 DELAWARE                               56-2084290
         (State of Incorporation)           (I.R.S. Employer Identification No.)

   200 PARK AVENUE, NEW YORK, NEW YORK                    10166
(Address of Principal Executive Offices)                (Zip Code)

                                 (212) 984-8000
              (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 July 30, 1999 the Registrant had 21,467,912 shares of Common Stock
outstanding.
================================================================================

<PAGE>

                         INSIGNIA FINANCIAL GROUP, INC.

                                    FORM 10-Q

                       FOR THE QUARTER ENDED JUNE 30, 1999

                                  -------------
                                      INDEX
                                  -------------
                                                                            Page
PART I -- FINANCIAL INFORMATION

  Item 1. Financial Statements

          Condensed Consolidated Statements of Income for the
            Three and Six Months Ended June 30, 1999 and 1998 ..............  2
          Condensed Consolidated Balance Sheets
            At June 30,  1999 and December 31, 1998.........................  3
          Condensed Consolidated Statements of Cash Flows
            For the Six Months Ended June 30, 1999 and 1998.................  4
          Notes to Condensed Consolidated Financial Statements..............  5

  Item 2. Management's Discussion and Analysis of
            Financial Condition and Results of Operations................... 11

  Item 3. Quantitative and Qualitative Disclosure of Market Risk............ 21

PART II -- OTHER INFORMATION

  Item 1. Legal Proceedings................................................. 22

  Item 6. Exhibits and Reports on Form 8-K.................................. 22

SIGNATURES ................................................................. 23

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                         INSIGNIA FINANCIAL GROUP, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                      (In thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                  Three Months Ended       Six Months Ended
                                                       June 30                 June 30
                                                       -------                 -------
                                                  1999         1998       1999         1998
                                                  ----         ----       ----         ----
<S>                                              <C>         <C>         <C>         <C>
REVENUES
   Real estate services                          $156,542    $124,128    $270,806    $226,639
   Property operations                                400          --         787          --
   Interest                                         1,135         783       2,262       1,065
   Other                                               --          87          --          95
                                                 --------    --------    --------    --------
      Total revenues                              158,077     124,998     273,855     227,799

COSTS AND EXPENSES
   Real estate services                           140,415     110,280     250,911     200,310
   Property operations                                148          --         262          --
   Administrative                                   2,743       1,782       4,627       3,528
   Interest                                         1,636         324       2,519         706
   Property interest                                  213          --         329          --
   Depreciation                                     1,495         690       2,602       1,345
   Property depreciation                               51          --         117          --
   Amortization of intangibles                      5,670       5,049      10,921       9,578
   Merger related expenses                             --          --       5,533          --
                                                 --------    --------    --------    --------
      Total expenses                              152,371     118,125     277,821     215,467
                                                 --------    --------    --------    --------
                                                    5,706       6,873      (3,966)     12,332
Equity earnings (losses) in real estate ventures      360        (382)      1,922        (858)
Minority interests                                     --         113          --         146
                                                 --------    --------    --------    --------
 INCOME (LOSS) BEFORE INCOME TAXES                  6,066       6,604      (2,044)     11,620

   Provision for income taxes                       3,033       2,972          29       5,229
                                                 --------    --------    --------    --------
NET  INCOME (LOSS)                               $  3,033    $  3,632    $ (2,073)   $  6,391
                                                 ========    ========    ========    ========
Per share amounts - basic                        $    .14    $    .17    $   (.10)   $    .31
                                                 ========    ========    ========    ========
Per share amounts - assuming dilution            $    .13    $    .17    $   (.10)   $    .29
                                                 ========    ========    ========    ========
Weighted average common shares and
Assumed conversions                                23,186      21,986      21,555      22,016
                                                 ========    ========    ========    ========
</TABLE>

--------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.

                                       2
<PAGE>

                         INSIGNIA FINANCIAL GROUP, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                              June 30,   December 31,
                                                                1999         1998
                                                                ----         ----
                                                             (Unaudited)     (Note)
<S>                                                           <C>          <C>
ASSETS
   Cash and cash equivalents                                  $  42,677    $  53,489
   Receivables                                                  167,020      153,807
   Mortgage loans held for sale                                  21,074       18,409
   Restricted cash                                               13,702       10,468
   Property and equipment                                        37,287       27,897
   Real estate interests                                         63,035       58,196
   Property management contracts                                 34,658       38,033
   Costs in excess of net assets of acquired businesses         313,988      213,829
   Other assets                                                  26,756       21,361
                                                               --------     --------
Total assets                                                   $720,197     $595,489
                                                               ========     ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Accounts payable                                           $  13,817    $  14,367
   Commissions payable                                           63,718       56,391
   Accrued incentives                                            11,201       32,662
   Accrued and sundry liabilities                                74,616       64,388
   Mortgage warehouse line of credit                             18,109       17,915
   Notes payable                                                134,492       17,867
   Real estate mortgage notes payable                            21,333        8,656
                                                               --------     --------
                                                                337,286      212,246
                                                               --------     --------

Stockholders' Equity:
   Common Stock, par value $.01 per share - authorized
     80,000,000 shares, 21,466,251 (1999) and 21,423,646
     (1998) issued and outstanding shares, net of 591,700
     (1999) and 139,200 (1998) shares held in treasury              215          214
   Additional paid-in capital                                   389,445      383,075
   Retained (deficit) earnings                                     (417)       1,656
   Other comprehensive (loss) income                             (4,801)         141
   Notes receivable for Common Stock                             (1,531)      (1,843)
                                                               --------     --------
Total stockholders' equity                                      382,911      383,243
                                                               --------     --------
Total liabilities and stockholders' equity                     $720,197     $595,489
                                                               ========     ========
</TABLE>

NOTE: The Balance Sheet at December 31, 1998 has been derived from the audited
      financial statements at that date but does not include all the information
      and footnotes required by generally accepted accounting principles for
      complete financial statements.

--------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.

                                       3
<PAGE>

                         INSIGNIA FINANCIAL GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              Six Months Ended
                                                                   June 30,
                                                                   --------
                                                              1999         1998
                                                              ----         ----
<S>                                                         <C>          <C>
OPERATING ACTIVITIES
   Net (loss) income                                        $ (2,073)    $  6,391
   Adjustments to reconcile net (loss) income to net cash
     (used in) provided by operating activities:
      Depreciation and amortization                           13,640       10,923
      Merger related expenses                                  5,533           --
      Equity (earnings) losses                                (1,922)         858
      Minority interest                                           --         (146)
      Changes in operating assets and liabilities:
        Receivables                                           (5,906)      (1,072)
        Other assets                                             442       (2,602)
        Accounts payable and accrued expenses                (25,212)      (8,934)
        Commissions payable                                    7,327          516
                                                            --------     --------
   Net cash (used in) provided by operating activities        (8,171)       5,934
                                                            --------     --------

INVESTING ACTIVITIES
      Additions to property and equipment, net                (9,869)      (5,258)
      Payments made for acquisition of businesses           (109,021)     (51,600)
      Increase in mortgage loans held for sale                (2,665)      (2,296)
      Investment in real estate                              (16,496)     (21,282)
      Distributions from real estate investments              16,522          783
      Net (increase) decrease in restricted cash              (6,824)       1,953
                                                            --------     --------
   Net cash used in investing activities                    (128,353)     (77,700)
                                                            --------     --------

FINANCING ACTIVITIES
      Proceeds from exercise of stock options                  1,257           --
      Purchase of treasury stock                              (5,800)          --
      Net advances on mortgage warehouse line of credit          194          319
      Payments on notes payable                               (2,160)        (662)
      Proceeds from notes payable                            119,824        1,341
      Proceeds from real estate mortgage note payable         12,677           --
      Net transactions with Former Parent                         --       84,941
                                                            --------     --------
   Net cash provided by financing activities                 125,992       85,939
                                                            --------     --------

   Effect of exchange rate changes in cash                      (280)          --

   Net (decrease) increase in cash and cash equivalents      (10,812)      14,173
   Cash and cash equivalents at beginning of period           53,489        5,514
                                                            --------     --------
   Cash and cash equivalents at end of period               $ 42,677     $ 19,687
                                                            ========     ========
</TABLE>

--------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.

                                       4
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------

1.  Business

    ORGANIZATION

    Insignia Financial Group, Inc. ("Insignia" or the "Company"), headquartered
in New York, New York, is the parent company of an international real estate
organization. Insignia's service businesses specialize in commercial real estate
services, single-family home brokerage and mortgage origination, condominium and
cooperative apartment management, apartment brokerage and leasing, real estate
oriented financial services, equity co-investment, fund management and other
services. As more fully described below, Insignia's principal operating units
are Insignia/ESG, Inc. (international commercial property services), Realty One,
Inc. (single-family home brokerage and mortgage origination), Insignia
Residential Group, Inc. (condominium and cooperative apartment management) and
the recently acquired Douglas Elliman (apartment brokerage and leasing)
(collectively, the "Insignia Businesses"). The European operations of
Insignia/ESG consist of Richard Ellis St. Quintin ("RESQ") in the United
Kingdom, Insignia RE GmbH in Germany and Insignia RE SpA in Italy.

    Through Insignia/ESG, Insignia provides a broad spectrum of commercial real
estate services, including tenant representation, property leasing and
management, property disposition and acquisition, investment sales, debt
placement, equity co-investment, development, redevelopment and consulting
services. Insignia/ESG provides these services for tenants, owners and investors
in office, industrial, retail, hospitality and mixed-use properties.
Insignia/ESG is among the leading providers of commercial real estate services
in the United States, enjoying a leadership market position in the New York
metropolitan area and significant market positions in property owner and/or
tenant services in Washington, D.C., Philadelphia, Boston, Chicago, Atlanta,
Phoenix, Los Angeles, San Francisco, Dallas and other major central business
districts. In all, Insignia/ESG has operations in 49 markets in the United
States. Insignia/ESG also has growing international capabilities, which allow it
to meet clients' expanding global needs, through RESQ in the United Kingdom,
Insignia RE GmbH in Germany and Insignia RE SpA in Italy. RESQ is among the
leading property services companies in the United Kingdom, with offices in
London, Manchester, Glasgow, Birmingham, Leeds, Liverpool, Belfast and Jersey.

    Through Realty One, Insignia Residential Group and Douglas Elliman, Insignia
provides a diversified array of residential real estate services, including
single-family home brokerage, mortgage origination, escrow services, apartment
brokerage and leasing and condominium and cooperative apartment management.
Realty One operates a full-service single-family residential brokerage and
mortgage origination business in northern Ohio and is the eighth largest (based
on unit volume) residential real estate brokerage firm in the United States
according to Real Trends "Big Broker Report" published in May 1999. Realty One
handled more than 21,300 transactions valued at over $3.1 billion in 1998. First
Ohio Mortgage Corporation, a mortgage loan affiliate of Realty One, originates
single-family home mortgages for Realty One clients and third parties. Insignia
Residential Group is the largest manager of cooperatives and condominiums in the
New York metropolitan area, according to the January 1999 issue of New York
Habitat, and one of the largest apartment managers in the United States.
Insignia Residential Group manages over 300 residential properties, consisting
of cooperatives, condominiums and rental properties, comprising more than 60,000
units. Douglas Elliman, acquired on June 23, 1999, operates the largest
residential real estate brokerage firm in New York City. Douglas Elliman
commands the number one market position for both residential sales and rentals
in New York City according to the annual ranking of residential brokerage
companies nation-wide published by Real Trends. Douglas Elliman closed more than
4,100 transactions valued at nearly $1.8 billion during 1998. On a combined
basis, Realty One and Douglas Elliman comprise the seventh largest residential
brokerage business in the United States, with aggregate 1998 transactions valued
at approximately $5 billion.

    SPIN-OFF

    Insignia, which was incorporated under the laws of the state of Delaware on
May 6, 1998 (formerly known as Insignia/ESG Holdings, Inc.), originally was a
wholly owned subsidiary of a company known as Insignia Financial Group, Inc.
("Former Parent"). On September 21, 1998, Former Parent effected the spin-off of
Insignia through a pro rata distribution (the "Spin-Off") to the holders of
common stock of Former Parent of all the outstanding common stock, par value
$0.01 per share, of Insignia ("Insignia Common Stock"). On October 1, 1998,
Former Parent (which then consisted solely of businesses and assets relating to
multi-family residential real estate) merged into Apartment Investment and
Management Company, a Maryland corporation ("AIMCO"), with AIMCO being the
surviving corporation (the "Merger"). On November 2, 1998, Insignia assumed the
name of Former Parent,

                                       5
<PAGE>

"Insignia Financial Group, Inc.", and reclaimed Former Parent's original New
York Stock Exchange symbol, "IFS." Insignia's principal executive offices are
located at 200 Park Avenue, New York, New York 10166, and its telephone number
at that address is (212) 984-8000.

2.  Interim Financial Information

    The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six months ended June 30,
1999 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1999. The financial results for the three and six months
ended June 30, 1998 present the results of operations of those Insignia
Businesses spun-off from Former Parent in September 1998 as if the Spin-Off
occurred at the beginning of the year. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.

3.  Reclassifications

    Certain prior year amounts have been reclassified to conform to the 1999
presentation. These reclassifications have no effect on net income.

4.  Stock Repurchase

    At June 30, 1999, 591,700 shares of Insignia Common Stock had been
repurchased at an aggregate cost of approximately $7.65 million. On July 6,
1999, Insignia announced the expansion of the repurchase program to an aggregate
of $17.5 million in Insignia Common Stock.

5.  Earnings Per Share

    The following table sets forth the computation of basic and diluted earnings
per share for the periods indicated. Due to the net loss for the six months
ended June 30, 1999, the exercise of options and warrants is not assumed as the
result would be antidilutive. The per share data for the three and six months
ended June 30, 1998 is presented on a pro forma basis assuming the Spin-Off
occurred at the beginning of the year.

<TABLE>
<CAPTION>
                                                 Three Months Ended            Six Months Ended
                                                     June 30,                      June 30,
                                                     --------                      --------
                                               1999            1998           1999          1998
                                               ----            ----           ----          ----
                                                     (In thousands, except per share data)
<S>                                           <C>             <C>           <C>           <C>
BASIC
Weighted average common shares outstanding     21,569          21,053         21,555        20,874
Assumed conversions                                --              --             --            --
                                              -------         -------       --------       -------
Total                                          21,569          21,053         21,555        20,874
                                              =======         =======       ========       =======
Net income (loss)                             $ 3,033         $ 3,632       $ (2,073)      $ 6,391
                                              -------         -------       --------       -------
Per share amounts - basic                     $   .14         $   .17       $   (.10)      $   .31
                                              =======         =======       ========       =======
DILUTED
Weighted average common shares outstanding     21,569          21,053         21,555        20,874
Assumed conversions                             1,617             933             --         1,142
                                              -------         -------       --------       -------
Total                                          23,186          21,986         21,555        22,016
                                              =======         =======       ========       =======
Net income (loss)                             $ 3,033         $ 3,632       $ (2,073)      $ 6,391
                                              -------         -------       -------        -------
Per share amounts - assuming dilution         $   .13         $   .17       $   (.10)      $   .29
                                              =======         =======       ========       =======
</TABLE>

                                       6
<PAGE>

6.  Segment Data

    Insignia is a fully integrated real estate services company with operations
in two principal reportable segments: commercial and residential services. The
commercial services segment is comprised of Insignia/ESG's domestic operations,
Richard Ellis St. Quintin in the United Kingdom, Insignia RE GmbH in Germany and
Insignia RE SpA in Italy. Additionally, the commercial services segment includes
the Company's real estate ownership operations, consisting of ownership in
co-investment partnerships and property held for development. The residential
services segment is comprised of Realty One, Insignia Residential Group, and the
recently acquired Douglas Elliman. "Other" represents unallocated corporate
administration of the Company. Assets included in "Other" consist primarily of
cash and property and equipment. These financial statements should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in Item 2 of this Form 10-Q.

<TABLE>
<CAPTION>
June 30, 1999                             Commercial   Residential    Other        Total
-------------                             ------------------------------------------------
                                                           (In thousands)
<S>                                       <C>          <C>          <C>          <C>
REVENUES:
   Real estate services                   $ 205,825    $  64,981    $      --    $ 270,806
   Property operations                          787           --           --          787
   Interest                                     563          498        1,201        2,262
   Other                                         --           --           --           --
                                          ------------------------------------------------
                                            207,175       65,479        1,201      273,855
                                          ------------------------------------------------
 COSTS AND EXPENSES:
   Real estate services                     189,630       61,281           --      250,911
   Property operations                          262           --           --          262
   Administrative                                --           --        4,627        4,627
   Interest                                     811          528        1,180        2,519
   Property interest                            329           --           --          329
   Depreciation                               1,784          802           16        2,602
   Property depreciation                        117           --           --          117
   Amortization of intangibles                9,199        1,722           --       10,921
   Merger related expenses                    5,533           --           --        5,533
                                          ------------------------------------------------
                                            207,665       64,333        5,823      277,821
                                          ------------------------------------------------
                                               (490)       1,146       (4,622)      (3,966)

Equity earnings in real estate ventures       1,922           --           --        1,922
                                          ------------------------------------------------

INCOME (LOSS) BEFORE INCOME TAXES             1,432        1,146       (4,622)      (2,044)

Provision (benefit) for income taxes          1,454          516       (1,941)          29
                                          ------------------------------------------------
NET (LOSS) INCOME                         $     (22)   $     630    $  (2,681)   $  (2,073)
                                          ================================================
Total assets                              $ 502,147    $ 165,565    $  52,485    $ 720,197
Real estate interests                        63,035           --           --       63,035
</TABLE>

                                       7
<PAGE>

<TABLE>
<CAPTION>
June 30, 1998                           Commercial   Residential  Other        Total
-------------                           ------------------------------------------------
                                                          (In thousands)
<S>                                     <C>          <C>          <C>          <C>
REVENUES:
   Real estate services                 $ 166,114    $  60,525    $      --    $ 226,639
   Interest                                   342          496          227        1,065
   Other                                       95           --           --           95
                                        ------------------------------------------------
                                          166,551       61,021          227      227,799
                                        ------------------------------------------------
COSTS AND EXPENSES:
   Real estate services                   144,423       55,887           --      200,310
   Administrative                              --           --        3,528        3,528
   Interest                                   343          746         (383)         706
   Depreciation                               791          554           --        1,345
   Amortization of intangibles              7,802        1,776           --        9,578
                                        ------------------------------------------------
                                          153,359       58,963        3,145      215,467
                                        ------------------------------------------------
                                           13,192        2,058       (2,918)      12,332

Equity losses in real estate ventures        (858)          --           --         (858)
Minority interests                            146           --           --          146
                                        ------------------------------------------------

INCOME (LOSS) BEFORE INCOME TAXES          12,480        2,058       (2,918)      11,620

Provision for income taxes                  5,570          885       (1,226)       5,229
                                        ------------------------------------------------

NET INCOME (LOSS)                       $   6,910    $   1,173    $  (1,692)   $   6,391
                                        ================================================

Total assets                            $ 374,510    $  95,084    $  16,342    $ 485,936
Real estate interests                      40,142           --           --       40,142
</TABLE>

Certain geographic information for Insignia is as follows:

<TABLE>
<CAPTION>
                           Six Months Ended                Six Months Ended
                            June 30, 1999                   June 30, 1998
                       --------------------------------------------------------
                                      Long-Lived                     Long-Lived
                       Revenues         Assets         Revenues        Assets
                       --------------------------------------------------------
                                           (In thousands)
<S>                    <C>             <C>             <C>             <C>
United States          $229,160        $287,452        $204,152        $216,100
United Kingdom           42,957          97,309          22,133          67,713
Other countries           1,738           1,172           1,514           2,612
                       --------------------------------------------------------
                       $273,855        $385,933        $227,799        $286,425
                       ========================================================
</TABLE>

7.  1999 Acquisitions

    Insignia acquired the following companies in the first half of 1999. These
acquisitions were accounted for as purchases.

    Lynch Murphy Walsh & Partners

    On March 1, 1999, Insignia acquired Lynch Murphy Walsh & Partners ("Lynch
Murphy"), a provider of commercial real estate services located in Boston,
Massachusetts. Lynch Murphy specializes in brokerage services, including
representation of tenants and landlords, investment sales and debt placements,
valuation services and advisory/consulting services. The base purchase price was
$12.0 million, all of which was paid in cash from borrowings under Insignia's
revolving credit facility. Additional purchase consideration of up to $10.0
million is contingent on the future performance of Lynch Murphy.

                                       8
<PAGE>

      St. Quintin Holdings Limited

      On March 5, 1999, Insignia acquired St. Quintin, a British real estate
services firm headquartered in London. The operations of St. Quintin have been
merged with Richard Ellis Group Limited ("REGL") and the combined entities now
operate under the name Richard Ellis St. Quintin throughout the United Kingdom.
The base purchase price was approximately $32.0 million. Additional purchase
consideration of up to approximately $12.0 million is contingent on the future
performance of St. Quintin. The purchase was funded with approximately $24.3
million in borrowings under Insignia's revolving credit facility, the issuance
of 305,981 shares of Insignia Common Stock and assumed options to purchase
611,962 shares of Insignia Common Stock.

      Douglas Elliman

      On June 23, 1999, Insignia acquired Douglas Elliman, a residential real
estate brokerage firm located in New York City. The base purchase price was
approximately $65 million paid in cash from borrowings under Insignia's
revolving credit facility. Additional purchase consideration of up to $10
million over the next five years is contingent on the future performance of
Douglas Elliman.

    Other Information

    Pro forma results of operations for the six months ended June 30, 1999 and
1998, respectively, assuming consummation of the Douglas Elliman (1999), St.
Quintin (1999) and REGL (1998) acquisitions as of January 1, 1998 are as
follows:

<TABLE>
<CAPTION>
                                                      Six Months Ended
                                                          June 30,
                                                          --------
                                                    1999           1998
                                                    ----           ----
                                           (In thousands, except per share data)

<S>                                               <C>            <C>
Revenues                                          $319,389       $294,346
                                                  ========       ========
Net (loss) income                                 $   (302)      $  8,965
                                                  ========       ========
Per share amounts - assuming dilution             $   (.01)      $    .40
                                                  ========       ========
</TABLE>

8.  Merger Related Expenses

    In connection with the acquisition of St. Quintin and its subsequent
combination with REGL, the Company incurred a one-time charge of $5.5 million in
the first quarter of 1999. This charge reflects the provision for the costs of
subleasing excess office space of REGL as a result of combining the operations
and, to a lesser extent, severance costs. The integration of REGL and St.
Quintin onto a single consolidated platform is substantially in place and
achieving cost savings ahead of expectations.

9.  Comprehensive Income

    In 1997, the Financial Accounting Standards Board issued Statement No. 130,
Reporting Comprehensive Income ("Statement 130"). Statement 130 establishes new
rules for the reporting and display of comprehensive income and its components.
Statement 130 requires unrealized gains or losses on available-for-sale
securities and foreign currency translation adjustments, reported separately in
shareholders' equity, to be included in other comprehensive income. Total
comprehensive loss for the six months ended June 30, 1999 was approximately $7
million, consisting of a $2.1 million reported net loss and $4.9 million in
foreign currency translation losses attributable substantially to the British
Pound. These foreign currency translation losses resulted from a decline in the
exchange rate from $1.6587 at December 31, 1998 to $1.5750 at June 30, 1999. No
differences existed between net income and comprehensive income for the six
months ended June 30, 1998.

                                       9
<PAGE>

10. Material Contingencies

    The Company and certain subsidiaries are defendants in lawsuits arising in
the ordinary course of business. Such lawsuits are primarily insured claims
arising from accidents at managed properties. Claims may result in substantial
compensatory and punitive damages. Management believes that such lawsuits will
be resolved without material loss to the Company or its subsidiaries.

           Pursuant to the merger agreement among Insignia, Former Parent and
AIMCO, Insignia and AIMCO were required to settle in cash any differences
between the actual adjusted net liabilities of Former Parent on the date of the
Merger and $458 million of adjusted net liabilities stipulated in the merger
agreement. Settlement negotiations were concluded in July 1999, resulting in a
final payment to be made by AIMCO to Insignia of approximately $1.26 million.
This amount is included in receivables at June 30, 1999.

11. Equity

    During the six month period ended June 30, 1999, the Company had the
following changes in stockholders' equity:

    a)   Exercise of stock options representing 159,792 shares of Insignia
         Common Stock at exercise prices ranging from $.01 to $11.72 per share.

    b)   Issuance of 29,332 shares of Insignia Common Stock for vested
         restricted stock awards.

    c)   Net loss of $2,073,000 for the six months ended June 30, 1999.

    d)   Accrued compensation of $337,000 relating to restricted stock awards.

    e)   Repurchase of 452,500 shares of Insignia Common Stock at an average
         price of $12.82 per share (or approximately $5.8 million in the
         aggregate).

    f)   Issuance of 305,981 shares of Insignia Common Stock and the assumption
         of options to purchase up to 611,962 shares of Insignia Common Stock
         (at an exercise price of $6.575) pursuant to the St. Quintin
         acquisition.

    g)   Adjustments of $2.5 million to additional paid-in capital for certain
         amounts estimated on the Spin-Off date.

                                       10
<PAGE>

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

INTRODUCTION

    Insignia is among the leading providers of commercial and residential real
estate services in the United States, with a growing presence in Europe.
Insignia, which operates in two principal business segments (commercial and
residential services), provides a diversified array of real estate services
including tenant representation, property leasing and management, consulting,
investment sales, development, redevelopment, debt placement, single-family home
brokerage and mortgage origination, apartment brokerage and leasing, fund
management and other services. Revenues from these services totaled $156.5
million and $270.8 million for the three and six months ended June 30, 1999,
respectively, reflecting strong gains of 26% and 19% compared to the same
periods of 1998.

    The commercial services businesses include Insignia/ESG's domestic
operations, Richard Ellis St. Quintin in the United Kingdom, Insignia RE GmbH in
Germany and Insignia RE SpA in Italy. These commercial businesses produced
aggregate service revenues of $205.8 million for the first half of 1999,
accounting for approximately 76% of the Company's total service revenues for the
period. With the continuing expansion of commercial services in Europe through
the acquisition of St. Quintin and its subsequent operational merger with REGL
in March 1999, Insignia continues to strengthen its position as a leader in
commercial real estate services internationally. Through RESQ, which produced
combined revenues of approximately $43 million for the first half of 1999,
Insignia holds a "top three" market position in the United Kingdom. The combined
strength of RESQ in London and Insignia/ESG in New York gives Insignia a
commanding position in two of the world's most important global business
centers.

    The residential services businesses include Realty One, Insignia
Residential Group, and Douglas Elliman. Realty One, located in Cleveland, Ohio,
is the largest provider of residential real estate brokerage services in Ohio
and the eighth largest (based on unit volume) in the United States according to
Real Trends "Big Broker Report" published in May 1999. Insignia Residential
Group is the largest provider of management services to cooperative and
condominium owners in the New York metropolitan area, with a total portfolio of
more than 60,000 units. Douglas Elliman is the largest provider of residential
brokerage services in New York City. On a combined basis, Realty One and Douglas
Elliman comprise the seventh largest residential brokerage business in the
United States, with aggregate 1998 transactions valued at approximately $5
billion. These residential businesses produced aggregate service revenues of $65
million for the first half of 1999.

    In addition to providing real estate services, Insignia also pursues
opportunities to purchase real estate assets primarily through co-investment
ventures with its institutional partners to acquire existing properties, and to
a lesser extent, property held for development. At June 30, 1999, Insignia held
interests in 20 co-investment partnerships owning an aggregate of 6 million
square feet of commercial property and 3,500 multi-family apartment units and
held interests as owner and developer of 5 office and industrial projects in
various stages of development. Insignia's ownership typically ranges from 5% to
35% in the co-investment properties and from 30% to 100% in the development
projects. Insignia also owns a 100% interest in a 155,000 square foot retail
property located in Norman, Oklahoma that is consolidated in the Company's
financial statements at June 30, 1999. All real estate ownership operations are
managed as a component of the Company's commercial services business.

    Insignia's primary objective is to increase earnings and stockholder value
through internal growth and the acquisition of select businesses. In addition to
net income, Insignia uses EBITDA (defined as real estate service revenues less
direct expenses and administrative costs), Net EBITDA (defined as income before
depreciation, amortization, income taxes and non-recurring one-time charges) and
Net EBITDA less income taxes, as measures of the Company's financial
performance.

BASIS OF PRESENTATION

    The comparative financial results for the three and six months ended June
30, 1998 present the results of operations of those Insignia Businesses spun-off
from Former Parent in September 1998 as if the Spin-Off occurred at the
beginning of the year. Administrative expenses in 1998, which included, among
other things, investment banking, information technology, legal, finance,
accounting and facilities expenses of the Former Parent, were allocated to
Insignia for all periods prior to the Spin-Off. These administrative
allocations, which totaled $3.5 million for the six months of 1998, were based
on detailed analysis of the operations of Former Parent using various methods,
including employee headcount, acquisition activities and estimated management
time devoted to the

                                       11
<PAGE>

operations of the Insignia Businesses. In the opinion of management, the methods
used for allocating expenses are reasonable.

FINANCIAL CONDITION

    Total assets increased by $124.7 million to $720.2 million at June 30, 1999.
The acquisitions of Lynch Murphy in Boston (March 1999), St. Quintin in the
United Kingdom (March 1999) and Douglas Elliman in New York City (June 1999)
were the primary source of this increase. These acquisitions, which included a
substantial amount of intangible assets, fueled the $100 million increase in
costs in excess of net assets of acquired businesses. Liabilities increased by
$125 million to $337.3 million at June 30, 1999. This increase is due
substantially to borrowings of $110 million on Insignia's revolving credit
facility for acquisition financing and the assumption of liabilities in
connection with the 1999 acquisitions mentioned above.

                                       12
<PAGE>

RESULTS OF OPERATIONS

    The following table sets forth certain data derived from the Company's
condensed consolidated statements of income for the three and six months ended
June 30, 1999 and 1998, respectively (In thousands):

<TABLE>
<CAPTION>
                                      Three Months Ended        Six Months Ended
                                           June 30,                  June 30,
                                           --------                  --------
                                      1999         1998         1999         1998
                                      ----         ----         ----         ----
<S>                                 <C>          <C>          <C>          <C>
REVENUES:
   Commercial
      Insignia/ESG                  $  89,321    $  72,346    $ 161,556    $ 142,904
      Europe                           26,448       15,610       44,269       23,210
   Residential                         40,773       36,172       64,981       60,525
                                    ---------    ---------    ---------    ---------
      Real estate services            156,542      124,128      270,806      226,639

COST AND EXPENSES:
   Real estate services               140,415      110,280      250,911      200,310
   Administrative                       2,743        1,782        4,627        3,528
                                    ---------    ---------    ---------    ---------

EBITDA - REAL ESTATE SERVICES (1)      13,384       12,066       15,268       22,801

   Real estate FFO (2)                  1,133          606        2,103          972
   Interest and other income            1,135          870        2,262        1,160
   Interest expense                    (1,636)        (324)      (2,519)        (706)
   Minority interests                      --          113           --          146
                                    ---------    ---------    ---------    ---------

NET EBITDA (1)                         14,016       13,331       17,114       24,373

   Income tax provision                (3,033)      (2,972)      (1,744)      (5,229)
                                    ---------    ---------    ---------    ---------

NET EBITDA LESS INCOME TAXES (1)       10,983       10,359       15,370       19,144

   Merger related expenses                 --           --       (5,533)          --
   Income tax benefit                      --           --        1,715           --

   Depreciation                        (1,495)        (690)      (2,602)      (1,345)
   Amortization of intangibles         (5,670)      (5,049)     (10,921)      (9,578)
   Depreciation - real estate            (785)        (988)      (1,923)      (1,830)
   Gains on sale of real estate            --           --        1,821           --
                                    ---------    ---------    ---------    ---------

NET INCOME (LOSS)                   $   3,033    $   3,632    $  (2,073)   $   6,391
                                    =========    =========    =========    =========
</TABLE>

(1) Neither EBITDA, Net EBITDA nor Net EBITDA less income taxes, as disclosed
above, should be construed to represent cash provided by operations pursuant to
generally accepted accounting principles ("GAAP"). These measures are not
defined by GAAP and Insignia's usage of these terms may differ from other
companies' usage of the same or similar terms.

(2) Funds From Operations ("FFO") is defined as income or loss from real estate
operations before depreciation, gains or losses on sales of property and
provisions for impairment.

                                       13
<PAGE>

    Insignia reported increases in total service revenues and Net EBITDA for the
second quarter of 1999 of 26% to $156.5 million and 5% to $14 million,
respectively, compared to the same period of 1998. Approximately 20% of the
revenue increase was attributable to 1999 acquisitions with the remainder
representing internal growth. These acquisitions contributed EBITDA of
approximately $3 million; however, total EBITDA for the second quarter increased
by only $1.3 million. The lower increase in EBITDA was primarily caused by the
following factors: $1.3 million in atypical expenses; a $1 million decline in
EBITDA for the New York tri-state area compared to 1998; a $600,000 decline in
EBITDA from comparable residential operations; and $1.1 million in incremental
expenses over 1998 due to the increased cost of certain administrative and
support functions above the Company's allocable portion of shared costs from
Former Parent (prior to Spin-Off in September 1998). The above mentioned
atypical expenses included the following items: $600,000 in professional fees
incurred in connection with acquisitions the Company is no longer pursuing;
$400,000 for a claim against an Insignia/ESG business closed in 1998; and
$300,000 in promotional expenses for the Douglas Elliman acquisition. Net
interest expense increased by $1 million as a result of borrowings for
acquisitions and FFO from real estate ownership increased by approximately
$500,000.

    Insignia's results for the first six months of 1999 reflected service
revenue gains of 19% to $270.8 million and a Net EBITDA decline of 30% to $17.1
million compared to the same period of 1998. The six month comparison was
impacted by the second quarter factors cited above, but more importantly, was
affected by the substantial differences in first quarter results of Realty One
and Insignia/ESG. Realty One realized a record first quarter in 1998 as the
Cleveland area experienced an uncharacteristically mild winter. Management
believes that the unusual weather in 1998 affected the normal seasonality of
Realty One resulting in the closing of home sales earlier in the year. The more
normal 1999 winter in Cleveland resulted in a return to normal seasonal sales
patterns. Insignia/ESG, while not directly impacted by weather conditions, has
traditionally produced a majority of its revenues and EBITDA in the second half
of the year. In 1998, Insignia/ESG experienced a reversal of this normal pattern
with the first quarter producing the highest quarterly EBITDA for the year due
to an unusual abundance of large transactions.

    Earnings for the six months of 1999 were further adversely affected by the
first quarter one-time charge of $5.5 million for merger related expenses of
RESQ. The merger related expenses represent the provision for costs of excess
office space to be sublet and other consolidation expenses in connection with
the operational merger of St. Quintin and REGL.

    As a result of the foregoing, earnings and per share results for the second
quarter of 1999 declined 16% to $3 million and 24% to $.13, respectively,
compared to 1998. For the six months ended June 30, 1999, earnings and per share
results declined to a net loss of $2.1 million and a per share loss of $.10,
compared to the robust levels experienced in 1998.

Commercial Real Estate Operations

    Real Estate Services

    Commercial services operations reported revenue increases of 32% to $115.8
million for the second quarter and 24% to $205.8 million for the six months of
1999 compared to the same periods of 1998. These results were impacted favorably
by the strength in international operations. In Europe, service revenues
increased 69% to $26.4 for the second quarter and 91% to $44.3 million for the
six months of 1999 in comparison to 1998. These increases are attributable
primarily to a full six months of results for REGL (compared to four months in
1998), the acquisition of St. Quintin and its operational merger with REGL in
March 1999 and the opening of an office in Frankfurt, Germany in June 1998.

    The domestic operations of Insignia/ESG reported revenue increases of 23% to
$89.3 million for the second quarter of 1999 and 13% to $161.6 million for the
six months of 1999, compared to 1998. The increases in revenues were favorably
impacted by the acquisitions of Hotel Partners (1998), Jackson Cross (1998) and
Lynch Murphy (1999) over the past year. These acquired businesses contributed
service revenues of $14.5 million and $20.4 million for the second quarter and
six months of 1999, respectively. Revenue gains were reported for all domestic
regions of Insignia/ESG with the exception of the New York tri-state area. While
second quarter results reflected a material recovery of activity levels in the
New York marketplace, service revenues for the first six months of 1999 in this
region declined 15% or $12.8 million to $70.2 million as a result of the first
quarter year-to-year decline. The West Coast region continued to perform
significantly ahead of expectations with revenue gains of 48% to $11.3 million
for the second quarter of 1999 and 45% to $21.6 million for the first half of
1999, compared to the same periods of 1998. The operations in the West Coast
region are attributable to internal growth in the property

                                       14
<PAGE>

management and leasing business in combination with the expansion of tenant
representation services launched in late 1998.

    Commercial services operations produced EBITDA of $11.5 million for the
second quarter of 1999 and $16.2 million for the six months of 1999. These
results represented a 24% increase for the second quarter and a 25% decline for
the first half of 1999 compared to 1998. European operations contributed EBITDA
of $3.2 million for the second quarter and $3.9 million for the six months of
1999, reflecting gains of 272% or $2.4 million and 85% or $1.8 million over the
same periods of 1998. Domestic operations produced EBITDA of $8.3 million in the
second quarter of 1999 compared to $8.4 million in 1998. While the above
mentioned acquisitions contributed slightly over $2 million in second quarter
EBITDA growth compared to 1998, the quarter was adversely affected by the $1
million reduction in EBITDA for the New York region, higher back office support
costs of approximately $750,000, and a $400,000 charge for a claim against a
business unit closed in 1998. For the six months of 1999, EBITDA declined by
approximately $7 million to $12.3 million, compared to 1998. The major
contributing factor beyond the second quarter factors was the previously noted
year to year difference in the New York market.

    Real Estate Ownership

    Insignia's strategy of co-investing with its institutional partners in real
estate assets continued to produce exceptional results. FFO from real estate
ownership produced increases of 87% to $1.1 million and 116% to $2.1 million for
the second quarter and six months of 1999 over the same periods of 1998. These
increases were achieved as a result of improved occupancy at existing properties
in the co-investment portfolio in combination with the impact of recent
co-investment purchases. Insignia's latest co-investment was in Airport
Corporate Center, a one million square foot office park adjacent to the Miami
International Airport, in partnership with GE Investment Realty Partners IV in
April 1999.

    Insignia reported equity earnings from real estate ownership of $360,000 and
$1.9 million for the second quarter and six months of 1999, compared to losses
of $382,000 and $858,000 for the same periods of 1998. Equity earnings for the
six months of 1999 were favorably impacted by realized gains of approximately
$1.8 million from the disposition of three co-investment properties in the first
quarter of 1999. The difference between real estate FFO and equity earnings
represents depreciation of real estate, gains or losses from sales of property
and provisions for impairment.

    Residential Services

    Residential services operations, which benefited from a favorable
environment for single-family home sales, produced revenue increases of 13% to
$40.8 million for the second quarter of 1999 and 7% to $65 million for the six
months of 1999 in comparison to the same periods in 1998. Realty One operations
reflected a full recovery in the second quarter of 1999 with increased revenue
of 5% to $30.7 million compared to the same period of 1998. Realty One's results
for the first half of 1999 reflected service revenues of $48.2 million,
representing a gain of 2% compared to 1998. Insignia Residential Group revenues
increased by 1% to $6.9 million and 5% to $13.6 million for the second quarter
and six months of 1999, respectively, compared to the same periods of 1998.
Douglas Elliman contributed service revenues of $3.1 million for the one week of
ownership in June 1999.

    Residential services operations produced EBITDA of $4.6 million for the
second quarter of 1999 (after the impact of $300,000 in promotional expenses for
the Douglas Elliman acquisition in June 1999) consistent with the same period of
1998. Operations for the six months of 1999 produced EBITDA of $3.7 million,
down 20% or $938,000 compared to 1998. The decline in EBITDA for the six months
of 1999 was due primarily to higher occupancy costs of Insignia Residential
Group (attributable to the relocation to new offices in late 1998) and the
decline in profit margins at Realty One resulting from marketplace pressures in
response to rising interest rates.

    Other Expenses Affecting Net Income

    Administrative costs increased by approximately $1.1 million over 1998
levels to $4.6 million for the six months of 1999. More than $600,000 of this
increase was attributable to professional fees incurred in the second quarter of
1999 in connection with aborted acquisition transactions. The remainder of the
increase can be traced principally to changes in the overhead cost structure of
the Company in comparison to the prior year presentation. Administrative costs
for first half of 1998 consisted entirely of allocations of Former Parent
overhead costs.

                                       15
<PAGE>

    Interest expense increased by $1.3 million to $1.6 million for the second
quarter of 1999 and $1.8 million to $2.5 million for the first half of 1999,
respectively, compared to the same periods of 1998. These increases are due
primarily to interest charges resulting from borrowings of $110 million on the
Company's revolving credit facility in connection with the acquisitions of Lynch
Murphy, St. Quintin and Douglas Elliman. Interest expense for the second quarter
and six months of 1998 was comprised of interest on Realty One borrowings,
principally under its warehouse line used in the origination of mortgage loans
for sale, and REGL borrowings substantially secured by restricted cash deposits.
The results for 1998 do not include any interest expense allocation from the
indebtedness of Former Parent.

    Depreciation and amortization of intangibles increased 25% in aggregate to
$7.2 million for the second quarter of 1999 and 24% to $13.5 million for the six
months of 1999, respectively, as compared to the same periods of 1998. These
increases are the result of increased capital investments in property and
equipment and acquisitions substantially comprised of purchased intangibles.

    Results for the first six months of 1999 are further affected by the first
quarter one-time charge of $5.5 million for merger related expenses in
connection with the acquisition of St. Quintin and its combination with the
existing operations of REGL. As previously noted, this one-time charge
substantially relates to the provision for costs associated with excess office
space to be subleased.

    Income taxes for the second quarter of 1999 are impacted by lower income
combined with an increase in the effective tax rate. Income taxes for the six
months of 1999 were impacted by a $1.7 million benefit, at UK statutory tax
rates, attributable to the previously mentioned one-time merger related
expenses.

LIQUIDITY AND CAPITAL RESOURCES

    Insignia's liquidity and capital resources consist of its cash, cash
provided from operations and available credit under its $185 million revolving
credit facility. At June 30, 1999, Insignia's total indebtedness included
approximately $110 million outstanding on this facility, notes issued to sellers
of acquired businesses of $9.3 million, a $18.1 million note financing single
family mortgages held for sale, mortgage notes of $21.3 million (which are
non-recourse to the Company) on controlled real estate assets and other debt of
subsidiaries totaling $15.2 million.

    Unrestricted cash at June 30, 1999 was $42.7 million, down from $53.5
million at December 31, 1998. The Company uses Net EBITDA and Net EBITDA less
income taxes, as measures of liquidity and working capital provided by
operations. The Company reported Net EBITDA of $17.1 million and $24.4 million
for the six months ended June 30, 1999 and 1998, respectively. Net EBITDA less
income taxes was $15.4 million and $19.1 million for the six months of 1999 and
1998, respectively. As compared to net income, the Net EBITDA measures
effectively eliminate the impact of certain non-cash charges such as
depreciation, amortization of intangible assets relating to acquisitions and
other non-recurring charges. Management believes that the presentation of such
supplemental measures enhance a reader's understanding of the Company's
operating performance, as they provide a measure of generated cash available for
use to service debt and for other required or discretionary purposes. As
previously noted, the year over year decline in these measures arose primarily
from differences in seasonal patterns in the first half of 1999 compared with
1998. Management expects these shortfalls to be recovered over the course of
1999 as virtually all business lines remain in line with annual expectations and
are experiencing increases in transactional activity.

    Net cash used in operating activities was approximately $8.2 million in the
first half of 1999 compared to net cash provided of $5.9 million in the
comparable period of 1998. Cash from operations is normally lower in the first
half of each year as a result of annual incentive payments with respect to the
preceding year and seasonal factors affecting transactional revenues (see also
"Nature of Operations" below).

    Capital expenditure requirements are not normally extensive, consisting
primarily of periodic computer, furniture and fixture replacements incurred in
connection with acquisitions or other personnel additions. Capital expenditures
in the first half of 1999, which totaled approximately $10 million, exceeded the
Company's usual expenditures and consisted primarily of leasehold improvements
and furniture and fixtures from office relocation and expansion and computer and
management system costs. Insignia expects capital expenditures to remain at
significant levels for the remainder of 1999 due to the continued development
and implementation of accounting and management systems at each of the Company's
principal operating units.

                                       16
<PAGE>

    Insignia expects to use cash on hand and net cash provided by operating
activities to fund capital expenditures primarily for computer related
purchases, acquisitions (including the payment of contingent payments earned)
and to make principal payments on the Company's outstanding indebtedness. The
Company anticipates that its existing sources of liquidity, including cash on
hand, operating cash flows and available credit under its revolving credit
facility, will be sufficient to meet the Company's working capital and capital
replacement needs for the foreseeable future and, in any event, for at least the
next twelve months. The Company's working capital needs are reassessed on a
routine basis and as acquisitions are identified and pursued.

    Insignia expects to use all or a portion of its Net EBITDA remaining after
capital expenditures and taxes, together with its unused credit facilities, to
finance selective acquisitions in its existing business lines and complementary
businesses, and to expand its real estate ownership.

THE YEAR 2000 ISSUE

Introduction

    The Year 2000 Issue relates to the inability of many computer systems to
recognize dates for the year 2000 and afterward. Systems that use only two
digits to designate a year (e.g., 2000 is entered as '00"), can malfunction when
dates are used in processing data and recalling data from storage. The problems
arising from such programming have come to be known as "The Year 2000 Issue."
The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000. If not addressed, the impact on operations and financial
reporting may range from minor errors to significant system failures or
miscalculations causing disruptions of operations, including such things as a
temporary inability to process transactions, pay invoices or conduct similar
routine business operations without interruption.

State of Readiness

    Former Parent of Insignia began addressing the Year 2000 Issue prior to the
September 1998 Spin-Off. Insignia, under the guidance of its Year 2000 Program
team, has developed a phased Year 2000 readiness plan to address its internal
systems that are comprised of both information technology ("IT") and non-IT
systems. The plan consists of the following seven key phases: awareness,
inventory, risk assessment, remediation, quality assurance, implementation and
contingency planning. The Company has substantially completed its awareness
phase and will continue this phase through December 31, 1999 to maintain a
heightened sense of awareness to the Year 2000 Issue. The Company, with the
assistance of an outside consultant, has substantially completed its
comprehensive inventory of its internal IT systems and is currently engaged in
an assessment of those systems.

    Insignia believes that its planned upgrade of existing IT systems and/or
conversions to new systems, will enable it to address the Year 2000 Issue
without material operational difficulties. The Company is continuing its
purchase and implementation of a new generation of computer systems for the
condominium/cooperative management business, new financial systems for its
international commercial services businesses and the upgrade of its broker
productivity and target marketing systems for the single-family home brokerage
business. The implementation of these new and upgraded systems is anticipated to
be complete and tested for quality assurance by the end of November 1999. Based
upon the results of the assessment phase, the Company will determine the
appropriate levels of remediation and the areas in which detailed contingency
planning will be required. The remediation phase of the Company's IT systems is
anticipated to be completed by the end of the third quarter or the early part of
the fourth quarter of 1999. The Company expects to complete the remediation of
its technical infrastructure first, with remediation of its mission critical
applications to be completed shortly thereafter. Insignia is also assessing its
exposure to the Year 2000 issues other than those associated with its internal
IT systems in order to develop a plan and contingencies to address these risks.
This assessment plan includes consideration of the Company's leased facilities
(including embedded systems such as devices used to control, monitor or assist
the operation of equipment and machinery at such facilities), third party
vendors and service suppliers.

    The Company believes that many of its customers, suppliers and other third
parties with whom the Company transacts business are also likely to be affected
by the Year 2000 Issue, which could in turn affect the Company. The ability of
such third parties to adequately address their own Year 2000 issues is outside
the Company's control. At this time, Insignia is in the process of reviewing the
Year 2000 readiness of its major suppliers and customers. There can be no
assurance that all aspects of the Year 2000 Issue, particularly those related to
the efforts of customers,

                                       17
<PAGE>

suppliers or other third parties, will be fully resolved. Because of the
diversity of Insignia's base of customers and suppliers, in the event that one
or more customers or suppliers fail to achieve Year 2000 readiness, the Company
believes that results of operations, financial position or cash flows should not
be materially adversely affected.

Costs to Address the Company's Year 2000 Issues

    Insignia expects its unreimbursed out of pocket Year 2000 costs through
fiscal 1999, including the costs of external consultants and technical
resources, to be approximately $3.5 million (inclusive of more than $2.0 million
in capital expenditures). Approximately $1.6 million of that amount has been
incurred through June 30, 1999. The Company is funding all Year 2000 efforts
with operating cash flows and cash on hand. Several factors that could impact
the Company's ability to make the necessary modifications or replacements
include, but are not limited to, the availability and cost of trained personnel
and the ability of such personnel to locate and correct all relevant computer
codes or to replace embedded computer chips in affected systems. If such
modifications are not completed on a timely basis or are substantially more
costly to implement than anticipated, the Company's business, financial
condition or the results of operations could be materially adversely affected.

    Properties for which the Company provides management services for third
party owners rely on a variety of third party suppliers to provide critical
operating services. These suppliers may utilize systems and embedded
technologies to control the operation of building systems such as utilities,
lighting, security, elevators, heating, ventilation and air conditioning
systems. The Company is in the process of obtaining assurances from suppliers as
to their Year 2000 readiness and preparing contingency plans, including the
identification of alternative suppliers. The Company does not control these
third party suppliers, and for some suppliers, such as utility companies, there
may be no feasible alternative suppliers available. The failure of these
suppliers' systems could have a material adverse effect on the operations of the
affected property, and widespread failures could have a material adverse effect
on the Company. THIS INFORMATION IS INTENDED SOLELY TO ADVISE THE INVESTMENT
COMMUNITY OF THE STEPS THAT THE COMPANY IS TAKING TO ASSIST OWNERS OF
COMPANY-MANAGED PROPERTIES WITH YEAR 2000 ISSUES RELATING TO NON-IT SYSTEMS. NO
OWNER OR TENANT IN A COMPANY-MANAGED PROPERTY SHOULD RELY ON THIS STATEMENT AS
AN INDICATION THAT THE COMPANY HAS OR WILL INVENTORY OR ASSESS THE MANAGED
PROPERTY ON ITS BEHALF OR THAT, IN FACT, SUCH PROPERTY IS OR WILL BE IN A STATE
OF YEAR 2000 READINESS. INQUIRIES IN THIS REGARD SHOULD BE ADDRESSED TO
APPROPRIATE PROPERTY MANAGEMENT PERSONNEL. Costs of remediating Year 2000 issues
associated with non-IT systems at managed properties should be borne exclusively
by the owners of such properties.

Risks and Contingency Plans

    The contingency planning process involves identifying reasonably likely
business disruption scenarios that, if they were to occur, could create
significant problems in the critical functions or operations of each business
unit. Each of the Company's business units is developing plans to respond to
such scenarios so that critical business functions and operations may to
continue to operate with minimal disruption. Insignia anticipates that the
contingency plans will be substantially complete by the end of the third quarter
1999, and that they will be continue to be reviewed and updated, as necessary,
up to and into 2000. The Company has projected that the most likely worst case
Year 2000 scenario would be the result of unidentified Year 2000 issues, which
result in unplanned downtime at a rate that is higher than normally experienced.
Potential disruptions of this nature should not result in material adverse
impact on the Company's results of operations, financial position or cash flow.
Although Insignia is not aware of any threatened claims related to the Year 2000
Issue, it may become subject to litigation arising from such claims and
depending on the outcome, such litigation could have a material adverse effect
on the Company. The Company has obtained certain insurance coverage to offset
these and other business risks related to the Year 2000 Issue, however, the
extent of any ultimate exposure, if any, is not yet known at this time.

                                       18
<PAGE>

ACQUISITIONS

    Insignia completed three strategic acquisitions in the first half of 1999
and continues to evaluate acquisition opportunities in pursuit of its global
growth strategy. This strategy focuses on the development of each of its
international and domestic businesses, while simultaneously seeking principal
opportunities to invest capital in real estate assets in partnership with its
clients. Such undertakings are expected in both commercial and residential real
estate assets and services. Insignia also expects that it may pursue
opportunities to diversify its lines of business and investment objectives as
circumstances and opportunities change. Due to the substantial non-cash
amortization incurred by the Company as a result of purchased goodwill and other
intangibles, depreciation of real estate, and interest expense charges
associated with acquisition financing, past and future acquisitions may
adversely affect net income.

RECENT ACCOUNTING PRONOUNCEMENTS

    In 1998, the Accounting Standards Executive Committee issued Statement of
Position 98-5, Reporting on the Costs of Start-Up Activities ("SOP 98-5"), which
is effective for financial statements for fiscal years beginning after December
15, 1998. SOP 98-5 requires costs of start-up activities and organization costs
to be expensed as incurred. Initial application should be reported as the
cumulative effect of a change in accounting principles and expensed in the first
quarter in the year of adoption. Insignia has no amounts capitalized that are
affected by the requirements of SOP 98-5.

    In 1998, the Accounting Standards Executive Committee issued Statement of
Position 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use ("SOP 98-1"). Under SOP 98-1, qualifying computer
software costs are required to be capitalized and amortized to income over the
software's estimated useful life. SOP 98-1 is effective for fiscal years
beginning after December 15, 1998. The adoption of SOP 98-1 has not had a
material effect on the Company.

    In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS 133 requires
the Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives are either offset against the change in fair value
of assets, liabilities, or firm commitments through earnings or recognized in
other comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. SFAS 133 is effective for financial statements for
fiscal years beginning after June 15, 2000. Management has not completed its
review of SFAS 133, but does not anticipate that its adoption will have a
material effect on the Company.

IMPACT OF INFLATION AND CHANGING PRICES

    Inflation has not had a significant impact on the results of operations of
Insignia (or Former Parent) in recent years and is not anticipated to have a
significant negative impact in the foreseeable future. Insignia's exposure to
market risk from changing prices consists primarily of fluctuations in rental
rates of properties managed, market interest rates on residential mortgages and
debt obligations, real estate property values, and foreign currency fluctuations
of its European operations.

    The revenues of the property management operations with respect to rental
properties are highly dependent upon the aggregate rents of the properties
managed, which are affected by rental rates and building occupancy rates. Rental
rate increases are dependent upon market conditions and the competitive
environments in the respective locations of the properties. Employee
compensation is the principal cost element of property management.

    The revenues associated with the commercial services business are impacted
by fluctuations in interest rates, lease rates, real property values and the
availability of space and competition in the market place. Commercial service
revenues are derived from a broad range of services that are primarily
transaction driven and are therefore volatile in nature and highly competitive.

    Changes in market interest rates on residential mortgage loans and changes
in real property values in northern Ohio and New York City impact the revenues
of the Company's residential brokerage and mortgage origination

                                       19
<PAGE>

businesses. Recent price and cost trends have not significantly affected profit
margins; however, changes in these trends in the future could have a potentially
significant impact on the profitability of Insignia.

NATURE OF OPERATIONS

    Revenues from tenant representation, investment sales, debt placements,
agency leasing and single family home brokerage, which collectively comprise a
substantial portion of Insignia's service revenues, are transactional in nature
and therefore subject to seasonality and business and capital market conditions.
The Company's quarterly results, particularly revenues and earnings, are
materially impacted by such seasonal and other factors.

    Consistent with the industry in general, the commercial services segment has
historically experienced its lowest quarterly operating results in the first
quarter of each year as a result of the desire of clients to complete
transactions by calendar year-end. This phenomenon generally results in higher
revenues and income in the last half of the year and a lull in transactional
activity and corresponding operating results during the first quarter.

    As previously noted, operating results in the first six months of 1998
significantly exceeded historical norms due to an unusual volume of large
leasing transactions in the commercial segment (principally in the New York
marketplace), while the fourth quarter of 1998 experienced lower than normal
activity because of adverse conditions in capital markets. The operating results
for the first six months of 1999 reflect the reversion of results to historical
seasonal patterns, as well as some lingering effects from the unfavorable
capital market conditions in late 1998.

    The residential services segment is materially impacted by the seasonal
factors of Realty One's home brokerage and mortgage origination business. Due to
the geographic location of Realty One's operations in Ohio, weather conditions
have historically had an adverse effect on single family home sales resulting in
operating losses during the first quarter of each year. The volume of Realty
One's home brokerage and mortgage transactions typically peak during the spring
and summer months, coinciding with both weather conditions and the increased
tendency for moving between school years, resulting in higher revenues and
earnings during the second and third quarters of each year.

    A significant portion of the expenses associated with transactional
activities in the commercial and residential segments is directly correlated to
revenue. As a consequence of the seasonality of revenues, the Company's income
is normally expected to be lowest in the first quarter and highest in the fourth
quarter of each year. Insignia continues to believes that its large, diversified
client base, geographical reach, overall size and number of annual transactions
help to minimize the impact of seasonality and other changes in business and
capital market conditions on annual revenues and earnings.

MARKET RISK AND RISK MANAGEMENT POLICIES

    Market risk is the exposure to loss resulting from changes in interest
rates, foreign currency exchange rates, commodity prices and equity prices.
Insignia's primary market risk exposure consists of changes in foreign currency
exchange rates and interest rates.

    The Company's earnings and cash flows are subject to fluctuations due to
changes in foreign currency exchange rates from the Company's operations in
foreign jurisdictions. In addition to the United States, the Company currently
conducts business in the United Kingdom, Germany and Italy. As a result, the
Company's financial results could be significantly affected by factors such as
changes in foreign currency exchange rates and weak economic conditions in these
foreign markets. Fluctuations in foreign currency exchange rates are not
expected to have a material impact on the Company.

    The Company's interest income and expense are most sensitive to the changes
in the general level of interest rates. In this regard, changes in interest
rates affect the interest earned on the Company's cash equivalents and
short-term investments as well as interest paid on its debt. Interest rates are
sensitive to many factors' including governmental monetary and tax policies,
domestic and international economic and political considerations and other
factors that are beyond the Company's control. Based on prevailing interest
rates at June 30, 1999, a 1% increase or decrease would not have a material
impact on the Company.

FORWARD LOOKING STATEMENTS

                                       20
<PAGE>

    Certain items discussed in this report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 and as such may involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. You can
identify such statements by the fact that they do not relate strictly to
historical or current facts. These statements use words such as "believe",
"expect", "should" and "anticipate". Such information includes, without
limitation, statements regarding the results of litigation, the effects of the
Spin-Off and the Merger, the effects of Year 2000 Issues, Insignia's future
financial performance and estimated capital expenditures. Actual results will be
affected by a variety of risks and factors, including, without limitation,
national and local economic conditions and real estate risks and financing
risks.

    With respect to the Year 2000 Issues, actual results may be affected by the
availability of qualified personnel and other information technology resources,
the ability to identify and remediate all date-sensitive lines of computer code
or to replace embedded computer chips in affected systems or equipment and the
actions and ability of third party customers and suppliers to successfully
address their Year 2000 Issues.

    All such forward-looking statements speak only as of the date of this
report. The Company expressly disclaims any obligation or undertaking to release
publicly any updates of revisions to any forward-looking statements contained
herein to reflect any change in the Company's expectations with regard thereto
or any change in events, conditions or circumstances on which any such statement
is based.

Item 3. Quantitative and Qualitative Disclosure of Market Risk

    The information called for by this item is provided under the caption
"Market Risk and Risk Management Policies" under Item 2 Management's Discussion
and Analysis of Financial Condition and Results of Operations.

                                       21
<PAGE>

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

      See Note 10 in Notes to Condensed Consolidated Financial Statements, Part
I, Item 1, of this Form 10-Q.


Item 6. Exhibits and Reports on Form 8-K

      a) Exhibits

         27.1 Financial Data Schedule

      a) Reports on Form 8-K

      The following reports on Form 8-K were filed during the quarter ended
      June 30, 1999:

      1.    Form 8-K/A dated March 5, 1999 and filed May 19, 1999, amending Form
            8-K filed March 18, 1999 disclosing the financial statements of St.
            Quintin Holdings Limited.

      2.    Form 8-K dated May 28, 1999 and filed June 3, 1999, disclosing
            Registrant's announcement of its intention to acquire Douglas
            Elliman.

                                       22
<PAGE>

                                   SIGNATURES


      Pursuant to the requirements of Section 13 or 15(d) 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.


                                       INSIGNIA FINANCIAL GROUP, INC.


                                       by: /s/ Andrew L. Farkas
                                           ------------------------------------
                                           Andrew L. Farkas
                                           Chairman and Chief Executive Officer


                                       by: /s/ James A. Aston
                                           ------------------------------------
                                           James A. Aston
                                           Chief Financial Officer



<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.


                                       INSIGNIA FINANCIAL GROUP, INC.


                                       by:
                                           ------------------------------------
                                           Andrew L. Farkas
                                           Chairman and Chief Executive Officer


                                       by:
                                           ------------------------------------
                                           James A. Aston
                                           Chief Financial Officer