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 September 30, 1996

       [   ]    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 1-11195


                            LIFE PARTNERS GROUP, INC.

              Delaware                                  No. 75-2301836
       ----------------------                   ------------------------------
       State of Incorporation                   IRS Employer Identification No.


        11825 N. Pennsylvania Street
           Carmel, Indiana  46032                           (317) 817-6100
       -------------------------------                       --------------
    Address of principal executive offices                       Telephone


     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 [ ]

        Shares of common stock outstanding as of November 1, 1996: 1,000




<PAGE>
<TABLE>
<CAPTION>



                                              PART 1 - FINANCIAL INFORMATION

ITEM 1.         FINANCIAL STATEMENTS.

                                        LIFE PARTNERS GROUP, INC. AND SUBSIDIARIES

                                                CONSOLIDATED BALANCE SHEET
                                      (Dollars in millions, except per share amount)
                                                                                                                Prior
                                                                                                                basis
                                                                                                            ------------
                                                                                        September 30,       December 31,
                                                                                            1996                1995
                                                                                            ----                ----
                                                                                         (unaudited)          (audited)
                                                         ASSETS
<S>                                                                                        <C>                   <C>
Investments:
   Fixed maturities:
     Actively managed fixed maturity securities at fair value (amortized cost:
       1996 - $3,365.7; 1995 - $2,561.5).............................................      $3,353.4             $2,672.4
     Held-to-maturity, at amortized cost (estimated fair value:
       1996 -  $ - ; 1995 - $721.4)..................................................           -                  591.0
   Equity securities at fair value (cost: 1996 - $13.8; 1995 - $20.9)................          14.0                 23.7
   Mortgage loans....................................................................          78.0                110.2
   Credit-tenant loans...............................................................          83.1                 87.8
   Policy loans......................................................................         227.7                226.2
   Short-term investments............................................................          19.0                197.7
   Investments in affiliates.........................................................          65.0                  -
   Other invested assets.............................................................          77.3                 68.9
                                                                                           --------             --------

       Total investments.............................................................       3,917.5              3,977.9

Accrued investment income............................................................          62.8                 54.8
Accounts receivable and uncollected premiums.........................................          23.2                 29.3
Reinsurance receivables..............................................................         305.0                244.8
Income taxes.........................................................................          80.7                  -
Cost of policies purchased...........................................................         577.4                306.0
Cost of policies produced............................................................          17.6                238.7
Goodwill (net of accumulated amortization: 1996 - $3.6; 1995 - $13.8)................         571.4                100.5
Other assets.........................................................................          22.6                 28.9
                                                                                           --------             --------

     Total assets....................................................................      $5,578.2             $4,980.9
                                                                                           ========             ========

                                           LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
   Insurance liabilities.............................................................      $4,525.5             $4,146.9
   Income tax liabilities............................................................           -                   39.3
   Investment borrowings.............................................................          87.7                 73.6
   Notes payable.....................................................................         103.0                246.1
   Other liabilities.................................................................         101.9                 74.5
                                                                                           --------             --------

       Total liabilities.............................................................       4,818.1              4,580.4
                                                                                           --------             --------

Shareholder's equity:
   Common stock and additional paid-in capital (par value $.001; 50,000,000
     shares authorized; shares issued and outstanding: 1996 - 1,000;
     1995 - 27,911,851)..............................................................         741.0                287.9
   Unrealized appreciation (depreciation) of securities:
     Fixed maturity securities (net of applicable deferred income taxes:
       1996 - $(2.0); 1995 - $30.3)..................................................          (3.6)                56.2
     Other invested assets (net of applicable deferred income taxes:
       1996 - $.2; 1995 - $.9).......................................................            .6                  2.1
   Retained earnings.................................................................          22.1                 54.3
                                                                                           --------             --------

       Total shareholder's equity....................................................         760.1                400.5
                                                                                           --------            ---------

       Total liabilities and shareholder's equity....................................      $5,578.2             $4,980.9
                                                                                           ========             ========

               The accompanying notes are an integral part of the
                       consolidated financial statements.

</TABLE>
                                                             2

<PAGE>
<TABLE>
<CAPTION>



                                        LIFE PARTNERS GROUP, INC. AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENT OF OPERATIONS
                                      (Dollars in millions, except per share amounts)

                                                        (unaudited)

                                                                                          Prior basis
                                                                               ---------------------------------------
                                                                 Three months ended       Six months       Nine months
                                                                    September 30,           ended            ended
                                                                 -------------------       June 30,       September 30,
                                                                 1996           1995         1996             1995
                                                                 ----           ----         ----             ----
<S>                                                             <C>             <C>         <C>             <C>    
Revenues:
   Insurance policy income..................................    $  85.8         $78.8       $155.8          $215.7
   Investment activity:
     Net investment income .................................       77.7          72.4        148.3           211.4
     Net trading losses.....................................        (.4)           -            -               -
     Net realized gains (losses)............................       (1.7)         11.9          2.3            14.3
   Other income.............................................        1.0           1.0          2.6             2.9
                                                                -------         -----       ------          ------
     Total revenues.........................................      162.4         164.1        309.0           444.3
                                                                -------         -----       ------          ------

Benefits and expenses:
   Insurance policy benefits ...............................       55.7          43.3         83.0           134.4
   Interest expense on annuities and financial products.....       38.3          37.1         75.1           101.0
   Interest expense on notes payable........................        2.9           9.7         11.8            21.7
   Interest expense on investment borrowings................         .2           2.1          2.1             6.1
   Amortization related to operations.......................        8.8          28.5         65.6            68.7
   Amortization related to realized gains (losses)..........        -             (.2)          .1             (.7)
   Acquisition and merger expenses..........................        -             -            7.9              -
   Other operating costs and expenses.......................       19.1          20.4         35.9            72.3
                                                                -------         -----       ------          ------

     Total benefits and expenses............................      125.0         140.9        281.5           403.5
                                                                -------         -----       ------          ------

     Income before income tax and extraordinary charge......       37.4          23.2         27.5            40.8
Income tax expense..........................................       15.0           8.4         11.6            14.7
                                                                -------         -----       ------          ------

     Income before extraordinary charge.....................       22.4          14.8         15.9            26.1
Extraordinary charge on extinguishment of debt,
   net of tax...............................................         .3            -            -                -
                                                                -------         -----       ------          ------

     Net income.............................................    $  22.1         $14.8       $ 15.9          $ 26.1
                                                                =======         =====       ======          ======












               The accompanying notes are an integral part of the
                       consolidated financial statements.
</TABLE>

                                                             3


<PAGE>
<TABLE>
<CAPTION>



                                        LIFE PARTNERS GROUP, INC. AND SUBSIDIARIES

                                      CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
                                                   (Dollars in millions)

                                                        (unaudited)

                                                                                                      Prior basis
                                                                                             ----------------------------
                                                                           Three months      Six months      Nine months
                                                                               ended            ended           ended
                                                                           September 30,      June 30,      September 30,
                                                                               1996             1996            1995
                                                                               ----             ----            ----
<S>                                                                            <C>              <C>             <C>    
Common stock and additional paid-in capital:
   Balance, beginning of period........................................        $286.6 (a)       $287.9          $245.7
       Capital contribution............................................         144.5               -               -
       Common stock issued for cash....................................           -                 .5             1.7
       Common stock issued in acquisition of subsidiaries..............           -                 -             39.4
       Amounts related to stock options................................           -               (1.8)             -
       Adjustment of balance due to push down accounting...............         309.9               -               -
                                                                              -------           ------          ------

   Balance, end of period..............................................        $741.0           $286.6          $286.8
                                                                               ======           ======          ======

Net unrealized  appreciation  (depreciation) of securities:
   Fixed  maturity  securities:
       Balance, beginning of period....................................        $ (3.9) (a)      $ 56.2         $ (31.3)
          Change in net unrealized appreciation (depreciation).........          (3.6)           (60.1)           51.5
          Adjustment of balance due to push down accounting............           3.9               -               -
                                                                               ------           ------         -------

       Balance, end of period..........................................        $ (3.6)          $ (3.9)        $  20.2
                                                                               ======           ======         =======

   Other invested assets:
       Balance, beginning of period....................................        $   .4 (a)       $  2.1         $   8.5
          Change in net unrealized appreciation .......................            .6             (1.7)           (5.8)
          Adjustment of balance due to push down accounting............           (.4)              -               -
                                                                               ------           ------         -------

       Balance, end of period..........................................        $   .6           $   .4         $   2.7
                                                                               ======           ======         =======

Retained earnings:
   Balance, beginning of period........................................        $  68.5 (a)      $ 54.3         $  70.8
       Net income......................................................          22.1             15.9            26.1
       Dividends on common stock.......................................            -              (1.7)           (2.2)
       Adjustment of balance due to push down accounting...............         (68.5)              -               -
                                                                               ------           ------         -------

   Balance, end of period..............................................        $ 22.1           $ 68.5         $  94.7
                                                                               ======           ======         =======

          Total shareholder's equity...................................        $760.1           $351.6         $ 404.4
                                                                               ======           ======         =======
<FN>

(a)    Beginning of period balances reflect the prior accounting basis.

</FN>







               The accompanying notes are an integral part of the
                       consolidated financial statements.

</TABLE>
                                                           4

<PAGE>

<TABLE>
<CAPTION>


                                        LIFE PARTNERS GROUP, INC. AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENT OF CASH FLOWS
                                                   (Dollars in millions)

                                                        (unaudited)

                                                                                                       Prior basis
                                                                                             ----------------------------
                                                                           Three months      Six months       Nine months
                                                                               ended            ended            ended
                                                                           September 30,      June 30,       September 30,
                                                                               1996             1996             1995
                                                                               ----             ----             ----

<S>                                                                         <C>                <C>              <C>   
Cash flows from operating activities:
   Net income............................................................   $   22.1           $  15.9          $  26.1
   Adjustments to reconcile net income to net cash provided by 
     operating activities:
       Extraordinary charge..............................................         .5               -                -
       Amortization and depreciation.....................................        7.1              15.2             30.1
       Income taxes......................................................       (9.1)            (10.2)            34.6
       Insurance liabilities.............................................        2.0              (5.4)            28.7
       Interest credited to insurance liabilities........................       38.3              75.1            101.0
       Fees charged to insurance liabilities.............................      (71.7)           (125.6)          (170.7)
       Accrual and amortization of investment income.....................       (7.3)             (3.1)            (4.2)
       Deferral of cost of policies produced.............................      (31.4)            (15.0)           (39.1)
       Realized (gains) losses  and trading (income) losses on
          investments....................................................        2.1              (2.3)           (14.3)
       Other, net........................................................      (18.0)             (5.5)           (21.1)
                                                                            --------           -------          -------

         Net cash used by operating activities...........................      (65.4)            (60.9)           (28.9)
                                                                            --------           -------          -------

Cash flows from investing activities:
   Sales of investments..................................................      147.2              83.3            235.9
   Maturities and redemptions............................................       80.7             104.6             99.2
   Purchases of investments..............................................     (268.3)           (350.4)          (260.9)
   Other.................................................................      (32.0)             (1.2)             (.7)
                                                                            --------           -------          -------

         Net cash provided (used) by investing activities................      (72.4)           (163.7)            73.5
                                                                            --------           -------          -------

Cash flows from financing activities:
   Capital contribution from Conseco.....................................      144.5                -                -
   Issuance of common stock, net.........................................        -                  .5              1.7
   Issuance of notes payable.............................................        -                 -               36.0
   Payments on notes payable.............................................     (148.7)             (7.5)           (56.8)
   Dividends paid on common stock........................................        -                (1.7)            (2.2)
   Deposits to insurance liabilities.....................................      129.3             265.1            347.6
   Withdrawals from insurance liabilities................................      (63.5)           (148.4)          (195.3)
   Investment borrowings.................................................       16.1              (2.0)           (21.0)
                                                                            --------           -------          -------

         Net cash provided by financing activities.......................       77.7             106.0            110.0
                                                                            --------           -------          -------

         Net increase (decrease) in short-term investments...............      (60.1)           (118.6)           154.6

Short-term investments, beginning of period..............................       79.1             197.7             41.7
                                                                            --------           -------          -------

Short-term investments, end of period....................................   $   19.0           $  79.1           $196.3
                                                                            ========           =======           ======


               The accompanying notes are an integral part of the
                       consolidated financial statements.
</TABLE>

                                        5

<PAGE>


                   LIFE PARTNERS GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



     The  following  notes should be read in  conjunction  with the notes to the
consolidated  financial  statements  contained in the Form 10-K of Life Partners
Group, Inc. for the year ended December 31, 1995.

     SIGNIFICANT ACCOUNTING POLICIES

     Organization and Basis of Presentation

     The consolidated  financial  statements  include Life Partners Group,  Inc.
("we" or "LPG") and its wholly owned  insurance  subsidiaries,  all of which are
collectively  referred  to  hereinafter  as  "LPG" or the  "Company".  Insurance
subsidiaries    include:    Massachusetts   General   Life   Insurance   Company
("Massachusetts  General"),  Philadelphia Life Insurance Company  ("Philadelphia
Life"),  Wabash  Life  Insurance  Company  ("Wabash")  and Lamar Life  Insurance
Company ("Lamar Life").  The Company  primarily  markets a diverse  portfolio of
universal  life  insurance  and,  to  a  lesser  extent,   annuity  products  to
individuals  through two primary marketing  systems-the client company marketing
system  and  the  regional  director  marketing  system-comprising  a  total  of
approximately 25,000 professional independent producers.

     The  unaudited  consolidated  financial  statements  have been  prepared in
accordance with the instructions to Form 10-Q and, therefore, do not include all
disclosures required by generally accepted accounting principles. However, these
statements  include all adjustments  (consisting only of normal recurring items)
necessary to present fairly the Company's  financial position and the results of
operations  on  a  basis  consistent  with  that  of  prior  audited   financial
statements. Intercompany transactions have been eliminated in consolidation.

     In preparing  financial  statements in conformity  with generally  accepted
accounting  principles,  we are required to make estimates and assumptions  that
significantly  affect various reported amounts.  For example, we use significant
estimates and assumptions in calculating the cost of policies produced, the cost
of policies purchased,  goodwill, insurance liabilities,  liabilities related to
litigation,  guaranty fund assessment accruals and deferred income taxes. If our
future experience differs  materially from these estimates and assumptions,  our
financial statements could be affected.

     Effective July 1, 1996, Conseco, Inc. ("Conseco") completed its merger with
LPG, in a transaction  pursuant to which LPG became a wholly owned subsidiary of
Conseco (the "Merger").  The Merger was consummated pursuant to an Agreement and
Plan of Merger  dated  March 11,  1996.  In the  Merger,  each of the issued and
outstanding  shares of LPG common stock was  converted  into .5833 of a share of
Conseco's  common stock.  A total of 16.1 million  shares of the Conseco  common
stock (or equivalent shares) with a value of $588.4 million were issued.

     As a result of Conseco's  ownership of LPG, a new basis of accounting under
the "push down" method was adopted  effective  July 1, 1996.  Under this method,
the assets and liabilities of LPG were revalued to reflect Conseco's cost basis,
which is based on the fair  values of such  assets  and  liabilities  on July 1,
1996.  The new  accounting  basis was  reflected in the  consolidated  financial
statements for periods subsequent to July 1, 1996.

                                        6

<PAGE>


                   LIFE PARTNERS GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



     The effect of the use of push down  accounting as a result of the Merger is
as follows (dollars in millions):
<TABLE>
<CAPTION>

                                                                                      Debit
                                                                                    (Credit)
                                                                                    -------
              <S>                                                                 <C>
              Fixed maturities..................................................  $   29.8
              Cost of policies purchased........................................     264.1
              Cost of policies produced.........................................    (265.4)
              Goodwill..........................................................     475.5
              Income tax assets.................................................      63.9
              Insurance liabilities.............................................    (233.1)
              Notes payable.....................................................     (33.6)
              Other.............................................................     (56.3)
              Common stock and additional paid-in capital.......................    (309.9)
              Net unrealized appreciation of securities.........................      (3.5)
              Retained earnings.................................................      68.5
</TABLE>

     Certain  amounts in the 1995  financial  statements  were  reclassified  to
conform with the 1996 presentation.

     ADJUSTMENT TO ACTIVELY MANAGED FIXED MATURITIES

     We classify  fixed maturity  securities  into three  categories:  "actively
managed" and  "trading  account"  (which we carry at  estimated  fair value) and
"held-to-maturity"  (which  we carry at  amortized  cost).  We have not held any
securities in the  "held-to-  maturity"  classification  since the Merger and we
held no "trading account" securities at September 30, 1996 or December 31, 1995.
At September 30, we adjusted  several  balance sheet  accounts to carry actively
managed fixed maturity securities at fair value as follows:
<TABLE>
<CAPTION>

                                                                                     Effect of fair value
                                                                       Balance      adjustment on actively
                                                                       before            managed fixed        Reported
                                                                     adjustment       maturity securities      amount
                                                                     ----------       -------------------      ------
                                                                                     (Dollars in millions)
<S>                                                                  <C>                  <C>                 <C>  
Actively managed fixed maturity securities.......................    $3,365.7              $(12.3)            $3,353.4
Cost of policies purchased.......................................       570.7                 6.7                577.4
Income tax asset.................................................        78.7                 2.0                 80.7
Unrealized depreciation of fixed maturity securities.............         -                  (3.6)                (3.6)
</TABLE>

     CHANGES IN NOTES PAYABLE

     During the third  quarter of 1996, we repaid the $148.7  million  principal
balance outstanding plus accrued interest under LPG's bank credit facility using
the proceeds from a $144.5 million  capital  contribution  received from Conseco
and available cash.

     See "Organization and Basis of Presentation"  above for a discussion of the
change in basis  resulting  from the Merger and the adoption of the  "push-down"
method of accounting.





                                        7

<PAGE>


                   LIFE PARTNERS GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



     CHANGES IN CAPITAL STOCK

     During the third  quarter of 1996,  the Company  received a $144.5  million
capital contribution from Conseco.

     See "Organization and Basis of Presentation"  above for a discussion of the
change in basis  resulting  from the Merger and the adoption of the  "push-down"
method of accounting.

     PRO FORMA DATA

     The  following  pro  forma  data are  presented  as if the  Merger  and the
acquisition of Lamar  Financial  Group,  Inc. (which occurred on April 28, 1995)
had occurred on January 1, 1995 (dollars in millions):
<TABLE>
<CAPTION>

                                                                                         Nine months
                                                                                             ended
                                                                                        September 30,
                                                                                     --------------------
                                                                                     1996            1995
                                                                                     ----            ----
     <S>                                                                             <C>             <C>  
     Revenues................................................................        $480.7          $469.2
     Income before extraordinary charge......................................          46.4            40.7
</TABLE>

     RELATED PARTY TRANSACTIONS

     After the Merger,  LPG has no employees and most  services  required by the
Company  (including  data  processing,   policy   administration,   finance  and
accounting,  and  investment  management)  are  provided  by  Conseco.  Fees for
services  provided by Conseco in 1996 are based on Conseco's direct and directly
allocable costs plus a 10 percent margin.  Total fees paid to Conseco were $18.5
million during the third quarter of 1996.




                                        8

<PAGE>


                   LIFE PARTNERS GROUP, INC. AND SUBSIDIARIES



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


     RESULTS OF OPERATIONS

     Financial data for periods subsequent to June 30, 1996 reflect the adoption
of a new basis of accounting under the "push down" method and, accordingly, data
for the 1995  period  may not be  comparable  with  data  for the  1996  period.
Significant  accounting  adjustments recorded as a result of the adoption of the
new basis are described in the notes to the consolidated financial statements.

     Operating data for the nine months ended  September 30, 1996, are presented
in two periods:  the six months  ended June 30,  1996,  (the period prior to the
adoption of a new basis of accounting)  and the three months ended September 30,
1996.

     1996  PERIODS  COMBINED  (SIX MONTHS  ENDED JUNE 30, 1996 AND THREE  MONTHS
     ENDED SEPTEMBER 30, 1996) COMPARED  TO NINE MONTHS ENDED SEPTEMBER 30, 1995

     Insurance  policy income consists of premiums  received on traditional life
insurance  products,   mortality  charges  and  administrative  fees  earned  on
universal life insurance products and policy fund and surrender charges assessed
against investment- type products. This account increased 12 percent in the 1996
periods from 1995, to $241.6 million.  Such increase  reflects the growth in the
universal life in-force block of business.

     Net investment  income in the 1996 periods increased 6.9 percent from 1995,
to $226.0 million.  Average invested assets  (amortized cost basis) increased 13
percent over 1995, to $3.9 billion,  while the yield earned on average  invested
assets  decreased  to 7.7  percent in 1996 from 8.1  percent  in 1995.  Invested
assets reflect the application of purchase  accounting to record the Merger.  In
addition,  invested  assets grew as a result of the acquisition of Lamar Life in
April 1995 and through operations.

     Net realized gains often  fluctuate from period to period.  LPG sold $230.5
million of investments  (principally fixed maturity securities) in 1996 compared
to $235.9  million in 1995.  These sales  resulted in net realized  gains of $.6
million and  trading  losses of $.4  million in 1996,  compared to net  realized
gains of $14.3 million in 1995.

     Additional  amortization  of cost of  policies  purchased  and the  cost of
policies produced is recognized in the same period as realized gains in order to
reflect reduced yields thereby reducing such amortization in future periods.

     Interest  expense on annuities and  financial  products in the 1996 periods
increased 12 percent from 1995,  to $113.4  million.  The increase  reflects the
increase in the in-force block of annuities  after the acquisition of Lamar Life
in April 1995 and growth through operations.

     Interest expense on notes payable  decreased 32 percent to $14.7 million in
1996  primarily  due to the  repayment  in the third  quarter  of 1996 of $148.7
million  principal  amount  outstanding  under the bank  credit  facility  and a
decrease in borrowing rates during 1996.

     Interest  expense on investment  borrowings  fluctuates based on investment
borrowing activities.

     Amortization  related to  operations  in the third quarter of 1996 reflects
the effect of  purchase  accounting  to record  the  Merger.  Such  amortization
consists  of  amortization  of  goodwill,  the cost of  policies  purchased  for
business in force at July 1, 1996, and the cost of policies produced  subsequent
to the July 1, 1996.

     Acquisition  and merger expenses of $7.9 million in the first six months of
1996 represent costs incurred in connection with the Merger. Such costs include,
but are not limited to financial advisory services,  and attorney and accounting
fees.

     Income tax expense in the 1996 periods  increased 81 percent from 1995,  to
$26.6 million, primarily due to the increase in pretax income. The effective tax
rates of 41 percent for the 1996  periods and 36 percent for 1995  exceeded  the
statutory   corporate  tax  rate  (35  percent)   primarily   because   goodwill
amortization cannot be deducted for federal income tax purposes.


                                        9

<PAGE>


                   LIFE PARTNERS GROUP, INC. AND SUBSIDIARIES



     THIRD QUARTER OF 1996 COMPARED TO THE THIRD QUARTER OF 1995

     Insurance  policy income in the third quarter of 1996 increased 8.9 percent
from 1995, to $85.8 million due to the factors described under the comparison of
the 1996 periods and the nine months ended September 30, 1995.

     Net  investment  income  increased 7.3 percent from 1995, to $77.7 million.
Average invested assets (amortized cost basis) were $3.9 billion in both periods
while the yield earned on average  invested  assets  increased to 7.9 percent in
1996 from 7.5  percent in 1995.  Such  amounts  reflect  the effect of  purchase
accounting to record the Merger.

     Interest expense on annuities and financial  products increased 3.2 percent
from 1995, to $38.3 million,  due to the factors  described under the comparison
of the 1996 periods and the nine months ended September 30, 1995.

     Interest  expense on notes payable  decreased 70 percent to $2.9 million in
the third quarter of 1996 primarily due to the repayment in the third quarter of
1996 of $148.7  million  principal  amount  outstanding  under  the bank  credit
facility.

     Interest  expense on investment  borrowings  fluctuates based on investment
borrowing activities.

     Amortization  related to operations in 1996 reflects the effect of purchase
accounting to record the Merger.  Such amortization  consists of amortization of
goodwill,  the cost of policies purchased for business in force at July 1, 1996,
and the cost of policies produced subsequent to July 1, 1996.

     Income  tax  expense in 1996  increased  79  percent  from  1995,  to $15.0
million, primarily due to the increase in pretax income. The effective tax rates
of 40 percent for 1996 and 36 percent for 1995 exceeded the statutory  corporate
tax rate (35 percent) primarily because goodwill amortization cannot be deducted
for federal income tax purposes.

SALES

     In accordance with generally accepted accounting principles,  the insurance
policy  income  shown  on our  consolidated  statement  of  operations  consists
primarily of premiums we receive on policies  which have life  contingencies  or
morbidity  features.  For annuity  contracts  without such features,  accounting
rules dictate that premiums  collected are not reported as revenues,  but rather
as deposits to insurance  liabilities.  We recognize revenues for these products
in the form of investment income and surrender or other charges.

     Premiums  collected for the third quarter of 1996 were $149.3  million,  of
which $129.3  million were  recorded as deposits to policy  liability  accounts.
This  compares  to $144.0  million  collected  and $121.1  million  recorded  as
deposits to policy  liability  accounts in the third  quarter of 1995.  Premiums
collected  for the nine  months of 1996 were  $453.6  million,  of which  $394.4
million were recorded as deposits to policy liability accounts. This compares to
$410.4 million  collected and $347.6  million  recorded as deposits to liability
accounts  in the first nine months of 1995.  Collected  premiums by type were as
follows:
<TABLE>
<CAPTION>

                                                                       Three months ended            Nine months ended
                                                                          September 30,                 September 30,
                                                                      -------------------            ----------------
                                                                      1996           1995            1996          1995
                                                                      ----           ----            ----          ----
                                                                                       (Dollars in millions)
     <S>                                                            <C>               <C>            <C>            <C>    
     Universal life.............................................      $ 86.8          $ 87.5         $262.5         $240.8
     Individual whole and term life.............................        10.4            10.6           35.8           33.9
     Accident and health........................................         5.7             8.2           14.4           17.7
     Annuities..................................................        46.4            37.7          140.9          118.0
                                                                      ------          ------         ------         ------

         Total..................................................      $149.3          $144.0         $453.6         $410.4
                                                                      ======          ======         ======         ======
</TABLE>



                                       10

<PAGE>
                   LIFE PARTNERS GROUP, INC. AND SUBSIDIARIES


     LIQUIDITY AND CAPITAL RESOURCES

     Changes in the  consolidated  balance sheet between  December 31, 1995, and
September 30, 1996, are significantly affected by the change in accounting basis
after  the  Merger  described  in  the  notes  to  the  consolidated   financial
statements.  In addition,  these changes reflect: (i) the growth in LPG's assets
and liabilities from operating  activities;  (ii) the notes payable  transaction
described in the accompanying  notes to the consolidated  financial  statements;
and (iii) the increase in investment borrowings.

     Excluding the mark-to-market adjustment, the ratio of debt to shareholder's
equity was 13 percent at  September  30,  1996,  and 72 percent at December  31,
1995.   Including  the   mark-to-market   adjustment,   the  ratio  of  debt  to
shareholder's  equity was 14 percent at September  30,  1996,  and 61 percent at
December 31, 1995.

     INVESTMENTS

     At September 30, 1996, the amortized cost and estimated fair value of fixed
maturity securities (all of which were actively managed) were as follows:
<TABLE>
<CAPTION>

                                                                            Gross          Gross        Estimated
                                                           Amortized     unrealized     unrealized         fair
                                                             cost           gains         losses           value
                                                             ----           -----         ------           -----
                                                                           (Dollars in millions)
<S>                                                        <C>             <C>             <C>         <C>    
United States Treasury securities and obligations of
   United States government corporations and agencies      $   99.8        $  .2           $  .1       $    99.9
Obligations of states and political subdivisions.......        27.2           .3              .1            27.4
Debt securities issued by foreign governments..........        34.9           .6             -              35.5
Public utility securities..............................       333.3          1.0              .8           333.5
Other corporate securities.............................     1,811.4         11.0            27.1         1,795.3
Mortgage-backed securities.............................     1,059.1          4.8             2.1         1,061.8
                                                           --------        -----           -----        --------

       Total...........................................    $3,365.7        $17.9           $30.2        $3,353.4
                                                           ========        =====           =====        ========
</TABLE>

     The following  table sets forth the  investment  ratings of fixed  maturity
securities at September 30, 1996 (designated  categories include securities with
"+" or  "-"  modifiers).  The  category  assigned  is the  highest  rating  by a
nationally  recognized  statistical rating organization or, as to $343.5 million
fair value of fixed  maturity  securities  not rated by such  firms,  the rating
assigned by the National Association of Insurance  Commissioners  ("NAIC").  For
the  purposes of this table,  NAIC Class 1  securities  are  included in the "A"
rating; Class 2, "BBB"; Class 3, "BB"; and Classes 4-6, "B and below":
<TABLE>
<CAPTION>


                                                                        Percent of
                                                                ---------------------------
                                                                   Fixed           Total
                            Investment rating                   maturities      investments
                            -----------------                   ----------      -----------
                   <S>                                            <C>              <C> 
                   AAA...............................              35%              30%
                   AA................................               9                8
                   A  ...............................              33               29
                   BBB...............................              17               14
                                                                  ---               --

                      Investment-grade...............              94               81
                                                                  ---               --

                   BB................................               3                3
                   B and below.......................               3                2
                                                                 ----              ---

                      Below investment-grade.........               6                5
                                                                 ----              ---

                   Total actively managed
                      fixed maturities...............              100%              86%
                                                                   ===               ==
</TABLE>

                                       11

<PAGE>


                   LIFE PARTNERS GROUP, INC. AND SUBSIDIARIES


     At September 30, 1996, our below  investment  grade fixed maturities had an
amortized cost of $233.1 million and estimated fair value of $216.0 million.

     The  Company's  investment  portfolio is subject to the risk of declines in
realizable  value. We attempt to mitigate this risk through the  diversification
and active management of our portfolio.  As of September 30, there were no fixed
maturity  securities  about which we had serious doubts as to the ability of the
issuer to  comply  with the  contractual  terms of its  obligations  on a timely
basis.

     Sales of investments  (principally  fixed maturity  securities)  during the
first nine months of 1996 generated  proceeds of $230.5 million and net realized
gains of $.6 million and trading  losses of $.4  million.  Sales of  investments
during the first nine months of 1995  generated  proceeds of $235.9  million and
net realized gains of $14.3 million.

     Investments in mortgage-backed  securities at September 30, 1996,  included
collateralized   mortgage   obligations   ("CMOs")   of   $609.3   million   and
mortgage-backed  pass-through  securities of $452.5 million. CMOs are securities
backed by pools of pass-through  securities and/or mortgages that are segregated
into sections or "tranches".  These securities provide for sequential retirement
of principal, rather than the retirement of principal on a pro rata basis, which
return occurs on  pass-through  securities  through  regular  monthly  principal
payments.

     The yield  characteristics of mortgage-backed  securities differ from those
of traditional fixed income  securities.  Interest and principal  payments occur
more frequently,  often monthly,  and mortgage-backed  securities are subject to
risks associated with variable prepayments. Prepayment rates are influenced by a
number of factors  which  cannot be  predicted  with  certainty,  including  the
relative  sensitivity of the mortgages backing the assets to changes in interest
rates,  a variety of economic,  geographic  and other  factors and the repayment
priority of the securities in the overall securitization structures.

     In  general,  prepayments  on the  underlying  mortgage  loans,  and on the
securities  backed by these  loans,  increase  when  prevailing  interest  rates
decline  significantly  below the interest rates on such loans.  Mortgage-backed
securities  purchased at a discount to par will  experience an increase in yield
when the  underlying  mortgages  prepay  faster than  expected.  Mortgage-backed
securities  purchased at a premium to par that prepay  faster than expected will
incur a reduction in yield.  When  interest  rates  decline,  the proceeds  from
prepayments  are likely to be  reinvested  at lower  rates than the  Company was
earning on the prepaid securities.  As interest rates rise, prepayments decrease
because fewer underlying mortgages are refinanced. When this occurs, the average
maturity and duration of the mortgage-backed  securities  increase.  This lowers
the yield on  mortgage-backed  securities  purchased  at a  discount,  since the
discount is  realized as income at a slower  rate,  and  increases  the yield on
those  purchased  at a  premium,  as  a  result  of a  decrease  in  the  annual
amortization of the premium.

     The following table sets forth the par value,  amortized cost and estimated
fair  value of  investments  in  mortgage-backed  securities  including  CMOs at
September 30, 1996, summarized by interest rates on the underlying collateral:
<TABLE>
<CAPTION>

                                                                        Par           Amortized         Estimated
                                                                       value            cost           fair value
                                                                       -----            ----           ----------
                                                                                (Dollars in millions)
<S>                                                                  <C>               <C>              <C>
Below 7 percent...............................................       $  258.8          $  245.9        $   246.9
7 percent - 8 percent.........................................          475.2             459.7            462.2
8 percent - 9 percent.........................................          179.3             179.0            179.3
9 percent and above...........................................          168.6             174.5            173.4
                                                                     --------          --------         --------

     Total mortgage-backed securities.........................       $1,081.9          $1,059.1         $1,061.8
                                                                     ========          ========         ========
</TABLE>




                                       12

<PAGE>
                   LIFE PARTNERS GROUP, INC. AND SUBSIDIARIES

    The amortized  cost and estimated fair value of  mortgage-backed  securities
including  CMOs at September 30, 1996,  summarized by type of security,  were as
follows:
<TABLE>
<CAPTION>
                                                                                                         Estimated fair value
                                                                                                         ----------------------
                                                                                                                   Percent of
                                                                                      Amortized                   fixed maturity
Type                                                                                     cost            Amount     securities
----                                                                                     -----           ------     ---------- 
                                                                                        (Dollars in millions)
<S>                                                                                  <C>               <C>             <C> 
Pass-throughs and sequential and targeted amortization classes                        $   807.2        $  810.0        24%
Support classes...........................................                                 45.7            46.4         1
Accrual (Z tranches) bonds................................                                 15.2            15.2         1
Planned amortization classes and accretion directed bonds                                  78.4            78.6         2
Subordinated classes......................................                                112.6           111.6         3 
                                                                                       --------        --------       ---

                                                                                       $1,059.1        $1,061.8        31%
                                                                                       ========        ========        ==
</TABLE>
 
     Pass-throughs and sequential and targeted amortization classes have similar
prepayment  variability.  Pass-throughs  have  historically  provided  the  best
liquidity   in   the   mortgage-backed    securities   market   and   the   best
price/performance  ratio when interest rates are volatile. This type of security
is also  frequently  used as collateral in the  dollar-roll  market.  Sequential
classes pay in a strict sequence; all principal payments received by the CMO are
paid to the  sequential  tranches in order of  priority.  Targeted  amortization
classes provide a modest amount of prepayment protection when prepayments on the
underlying  collateral  increase from those assumed at pricing;  they thus offer
slightly better call protection than sequential classes or pass-throughs.

     Planned  amortization and targeted  amortization classes are protected from
prepayment risk; the risk is absorbed by subordinated classes.  Subordinated CMO
classes have both prepayment and credit risk. The subordinated  classes are used
to lend credit enhancement to the senior securities and as such, both prepayment
and credit risk associated with this class are generally higher than that of the
senior securities.  The credit risk of subordinated  classes is derived from the
negative  leverage of owning a small percentage of the underlying  mortgage loan
collateral  while  bearing  a  majority  of the risk of loss due to  homeowners'
defaults.

     Reverse repurchase agreements and dollar-roll transactions are entered into
to increase  return on investments  and improve  liquidity.  These  transactions
generally terminate after 30 days and are accounted for as short-term borrowings
collateralized by pledged securities with book values approximately equal to the
loan value.  Such  borrowings  averaged  approximately  $57.1 million during the
first nine months of 1996.

     STATUTORY INFORMATION

     LPG's  life  insurance   subsidiaries  are  required  to  follow  statutory
accounting   practices  ("SAP")  prescribed  or  permitted  by  state  insurance
regulators.  SAP differs in many respects  from  generally  accepted  accounting
principles.  After appropriate eliminations of intercompany accounts, LPGs' life
insurance  subsidiaries  reported combined statutory net income of $25.0 million
for the nine months ended September 30, 1996 and the following  amounts on their
combined balance sheet at that date (dollars in millions):
<TABLE>
<CAPTION>

         <S>                                                                                    <C>   
         Statutory capital and surplus (a)..........................................            $191.7
         Asset valuation reserve ("AVR") (b)........................................              53.7
         Interest maintenance reserve ("IMR") (b)...................................              11.0
                                                                                                ------

              Total.................................................................            $256.4
                                                                                                ======

<FN>
     (a) In connection with the acquisition of Wabash, Massachusetts General and
         Philadelphia  Life,  we  increased  the capital of Wabash by  providing
         $410.0  million of cash in  exchange  for two  surplus  debentures.  As
         required by the regulatory authorities,  the remaining unpaid principal
         of $257.9 million at September 30, 1996 ($269.2 million at December 31,
         1995), is considered a part of statutory capital and surplus of Wabash.
         Wabash made scheduled  principal payments of $11.3 million plus accrued
         interest  on the  surplus  debentures  during  the  nine  months  ended
         September 30, 1996.

                                       13

<PAGE>


                   LIFE PARTNERS GROUP, INC. AND SUBSIDIARIES


     (b) Statutory  accounting practices classify certain segregated portions of
         surplus,  called  AVR and IMR,  as  liabilities.  The  purpose of these
         accounts  is to  stabilize  statutory  net income and  surplus  against
         fluctuations in the market value and  creditworthiness  of investments.
         The IMR  captures all realized  investment  gains and losses  resulting
         from changes in interest rates and provides for subsequent amortization
         of such amounts into  statutory  net income on a basis  reflecting  the
         remaining  life of the assets sold. The AVR captures  investment  gains
         and losses related to changes in creditworthiness  and is also adjusted
         each year based on a formula related to the quality and loss experience
         of the investment portfolio.
</FN>
</TABLE>

     Statutory  regulations  restrict  the amount of capital and surplus of life
insurance  subsidiaries  that may be  transferred  to the  parent in the form of
dividends,  loans or  advances.  Payments  to LPG by  Wabash  of  principal  and
interest on the  surplus  debentures  may be made by Wabash  from its  available
funds only when the Kentucky  Department  of  Insurance  is  satisfied  that the
financial  condition of Wabash  warrants  that action.  Additionally,  under the
terms of the surplus debentures,  payments of principal and interest may be made
only to the extent  the  statutory  capital  and  surplus  of Wabash  exceeds 25
percent of statutory liabilities  exclusive of the surplus debentures.  Wabash's
statutory surplus at September 30, 1996, was $191.7 million,  which exceeded the
minimum required capital and surplus by $101.9 million.

     Wabash's ability to service its obligation under the surplus  debentures is
dependent  upon its ability to receive  dividends and tax sharing  payments from
Massachusetts  General,  Philadelphia  Life and Lamar  Life.    During the first
nine months of 1996,  Philadelphia  Life paid  extraordinary  dividends  of $7.1
million to Wabash.  During the remainder of 1996,  Massachusetts General may pay
additional dividends up to $7.2 million without regulatory approval.



                                       14

<PAGE>


                   LIFE PARTNERS GROUP, INC. AND SUBSIDIARIES




                           PART II - OTHER INFORMATION

     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

        a)    Exhibits

              27  Financial Data Schedule

        b)    Reports on Form 8-K

              No reports on Form 8-K were filed  during the three  months  ended
              September 30, 1996.



                                       15

<PAGE>




                                    SIGNATURE

     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.



                                   LIFE PARTNERS GROUP, INC.


Dated: November 13 , 1996          By:  /s/ ROLLIN M. DICK
                                        ------------------
                                        Rollin M. Dick
                                        Executive Vice President and
                                          Chief Financial Officer
                                          (authorized officer and principal
                                          financial officer)


                                       16