|SECURITIES AND EXCHANGE COMMISSION                     
|-------------------------------------------------------
|Washington, D. C.  20549                               
|                                                       
|                                                       
|FORM 10-Q                                              
|                                                       
|                                                       
|Quarterly Report Pursuant to Section 13 or 15(d) of the
|Securities Exchange Act of 1934                        

|For the Quarterly Period Ended
September 30, 2001 | Commission File
No. 1-11632    
|------------------------------------------------- | -------------------------------
|GREAT AMERICAN FINANCIAL RESOURCES, INC.         
|Incorporated under
the Laws of Delaware           | IRS Employer I.D.No. 06-1356481
|250 East Fifth Street, Cincinnati, Ohio  45202   
|(513) 333-5300                                   





Page 1 of 24



GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

PART I

FINANCIAL INFORMATION



|GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES
|---------------------------------------------------------
|CONSOLIDATED BALANCE SHEET                               
|(Dollars in millions)                                    
|                                                         
|                                                         
|                                                         
|                                                         
|Assets                                                   
|Investments:                                             
|Fixed maturities - at market                             
|(amortized cost - $6,279.2 and $6,088.0)                 
|Equity securities - at market                            
|(cost - $38.1 and $30.5)                                 
|Investment in affiliate                                  
|Mortgage loans on real estate                            
|Real estate                                              
|Policy loans                                             
|Short-term investments                                   
|Total investments                                        
|                                                         
|Cash                                                     
|Accrued investment income                                
|Unamortized insurance acquisition costs, net             
|Other assets                                             
|Variable annuity assets (separate accounts)              
|                                                         
|                                                         
|                                                         
|Liabilities and Capital                                  
|Annuity benefits accumulated                             
|Life, accident and health reserves                       
|Notes payable                                            
|Payable to affiliates, net                               
|Deferred taxes on unrealized gains                       
|Accounts payable, accrued expenses and other             
|liabilities                                              
|Variable annuity liabilities (separate accounts)         
|Total liabilities                                        
|                                                         
|                                                         
|Mandatorily redeemable preferred securities              
|of subsidiary trusts                                     
|                                                         
|                                                         
|Stockholders' Equity:                                    
|Common Stock, $1 par value                               
|-100,000,000 shares authorized                           
|- 42,313,613 and 42,302,788 shares outstanding           
|Capital surplus                                          
|Retained earnings                                        
|Unrealized gains on marketable securities, net           
|Total stockholders' equity                               
|                                                         
|                                                         
|                                                         

2

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENT

(In millions, except per share amounts)



|Three months ended                                   | Nine months ended
|---------------------------------------------------- | -----------------
|September 30,                                        | September  30,   
|                                                     | 2001             
|Revenues:                                            |                  
|Life, accident and health premiums                   | $ 69.1           
|Net investment income                                | 129.2            
|Realized gains (losses)                              | (1.3)            
|Other income                                         | 25.3             
|                                                     | 222.3            
|Costs and Expenses:                                  |                  
|Annuity benefits                                     | 74.0             
|Life, accident and health benefits                   | 53.9             
|Insurance acquisition expenses                       | 22.9             
|Trust preferred distribution requirement             | 4.6              
|Interest and other debt expenses                     | 2.4              
|Other expenses                                       | 37.6             
|                                                     | 195.4            
|                                                     |                  
|Operating earnings before income taxes               | 26.9             
|Provision for income taxes                           | 8.5              
|                                                     |                  
|Net operating earnings                               | 18.4             
|                                                     |                  
|Equity in loss of affiliate, net of tax              | -                
|                                                     |                  
|Income before accounting change                      | 18.4             
|Cumulative effect of accounting change,
  net of tax | -                
|                                                     |                  
|Net Income                                           | $ 18.4           
|                                                     |                  
|                                                     |                  
|Earnings per common share:                           |                  
|Basic earnings per common share:                     |                  
|Income before accounting change                      | $0.43            
|Accounting change                                    | -                
|Net Income                                           | $0.43            
|                                                     |                  
|Diluted earnings per common share:                   |                  
|Income before accounting change                      | $0.43            
|Accounting change                                    | -                
|Net Income                                           | $0.43            
|                                                     |                  
|                                                     |                  
|Average number of common shares:                     |                  
|Basic                                                | 42.3             
|Diluted                                              | 42.7             
|                                                     |                  

3

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(In millions)

|                                           | Nine months ended
|------------------------------------------ | -----------------
|                                           | September 30,    
|                                           | 2001             
|Common Stock:                              |                  
|Balance at beginning of period             | $ 42.3           
|Common Stock retired                       | -                
|Balance at end of period                   | $ 42.3           
|                                           |                  
|                                           |                  
|Capital Surplus:                           |                  
|Balance at beginning of period             | $348.5           
|Common Stock issued                        | 0.5              
|Common Stock retired                       | (0.3)            
|Capital transaction of subsidiary          | (0.5)            
|Balance at end of period                   | $348.2           
|                                           |                  
|                                           |                  
|                                           |                  
|Retained Earnings:                         |                  
|Balance at beginning of period             | $237.0           
|Net income                                 | 36.4             
|Balance at end of period                   | $273.4           
|                                           |                  
|                                           |                  
|Unrealized Gains (Losses), Net:            |                  
|Balance at beginning of period             | $ 43.9           
|Change during period                       | 100.6            
|Balance at end of period                   | $144.5           
|                                           |                  
|                                           |                  
|                                           |                  
|                                           |                  
|                                           |                  
|                                           |                  
|                                           |                  
|Comprehensive Income:                      |                  
|Net income                                 | $ 36.4           
|Other comprehensive income - change in net |                  
|unrealized gains                           | 100.6            
|Comprehensive income                       | $137.0           
|                                           |                  

4

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(In millions)



|                                                           | Nine months ended
|---------------------------------------------------------- | -----------------
|                                                           | September 30,    
|                                                           | 2001             
|Cash Flows from Operating Activities:                      |                  
|Net income                                                 | $ 36.4           
|Adjustments:                                               |                  
|Equity in loss of affiliate, net of tax                    | -                
|Cumulative effect of accounting change                     | 5.5              
|Increase in life, accident and health reserves             | 34.2             
|Benefits to annuity policyholders                          | 214.0            
|Amortization of insurance acquisition costs                | 64.0             
|Depreciation and amortization                              | 8.9              
|Realized (gains) losses                                    | 25.8             
|Increase in insurance acquisition costs                    | (111.4)          
|Other, net                                                 | (13.2)           
|                                                           | 264.2            
|                                                           |                  
|Cash Flows from Investing Activities:                      |                  
|Purchases of and additional investments in:                |                  
|Fixed maturity investments                                 | (884.6)          
|Equity securities                                          | (3.3)            
|Real estate, mortgage loans and other assets               | (10.2)           
|Maturities and redemptions of fixed maturity investments   | 387.3            
|Sales of:                                                  |                  
|Fixed maturity investments                                 | 309.3            
|Equity securities                                          | 1.2              
|Real estate, mortgage loans and other assets               | 20.4             
|Decrease (increase) in policy loans                        | (1.3)            
|                                                           | (181.2)          
|                                                           |                  
|Cash Flows from Financing Activities:                      |                  
|Fixed annuity receipts                                     | 454.2            
|Annuity surrenders, benefits and withdrawals               | (483.0)          
|Net transfers (to) from variable annuity assets            | 3.2              
|Additions to notes payable                                 | 87.5             
|Reductions of notes payable                                | (15.4)           
|Issuance of Common Stock                                   | 0.5              
|Retirement of Common Stock                                 | (0.3)            
|Repurchase of trust preferred securities                   | (75.0)           
|                                                           | (28.3)           
|                                                           |                  
|Net increase (decrease) in cash and short-term investments | 54.7             
|Beginning cash and short-term investments                  | 87.5             
|Ending cash and short-term investments                     | $142.2           
|                                                           |                  

5

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



A.

Great American Financial Resources, Inc. ("GAFRI" or "the Company") markets retirement products, primarily fixed and variable annuities, and various forms of life and supplemental health insurance through independent agents, payroll deduction plans, financial institutions and in-home sales.

American Financial Group, Inc. ("AFG") and its subsidiaries owned 83% of GAFRI's Common Stock at November 1, 2001.

B.

Basis of PresentationThe accompanying Consolidated Financial Statements for GAFRI and its subsidiaries are unaudited; however, management believes that all adjustments (consisting only of normal recurring accruals unless otherwise disclosed herein) necessary for fair presentation have been made. The results of operations for interim periods are not necessarily indicative of results to be expected for the year. The financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary to be in conformity with generally accepted accounting principles.

Certain reclassifications have been made to prior periods to conform to the current period's presentation. All significant intercompany balances and transactions have been eliminated. All acquisitions have been treated as purchases. The results of operations of companies since their formation or acquisition are included in the consolidated financial statements.

The preparation of the financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Changes in circumstances could cause actual results to differ materially from those estimates.

Investments

Gains or losses on securities are determined on the specific identification basis. When a decline in the value of a specific investment is considered to be other than temporary, a provision for impairment is charged to earnings and the carrying value of that investment is reduced.

Emerging Issues Task Force Issue No. 99-20 ("EITF 99-20") established a new standard for recognizing impairment of certain asset-backed investments. Impairment losses on these investments must be recognized when (i) the fair value of the security is less than its carrying value and (ii) there has been an adverse change in the expected cash flows. The new standard became effective on April 1, 2001. Impairment losses on initial application of this rule were recognized as the cumulative effect of an accounting change. Subsequent impairments are recognized as a component of net realized gains and losses.

6

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



Investment in Affiliate

Due to Chiquita's announced intention to pursue a plan to restructure its public debt, GAFRI wrote down its investment in Chiquita common stock to market value at December 31, 2000. In 2001, GAFRI suspended accounting for the investment under the equity method due to the expected restructuring, and reclassified the investment to "Equity securities."

Insurance Acquisition Costs and Expenses

Deferred Policy Acquisition Costs ("DPAC")

DPAC related to annuities and universal life insurance products is amortized, with interest, in relation to the present value of expected gross profits on the policies. These expected gross profits consist principally of estimated future net investment income and surrender, mortality and other policy charges, less estimated future interest on policyholders' funds, policy administration expenses and death benefits in excess of account values. DPAC is reported net of unearned revenue relating to certain policy charges that represent compensation for future services. These unearned revenues are recognized as income using the same assumptions and factors used to amortize DPAC.

To the extent that realized gains and losses result in adjustments to the amortization of DPAC, such adjustments are reflected as components of realized gains. To the extent that unrealized gains (losses) from securities would result in adjustments to DPAC, unearned revenues and policyholder liabilities had those gains (losses) actually been realized, such balance sheet amounts are adjusted, net of deferred taxes.

DPAC related to traditional life and health insurance is amortized over the expected premium paying period of the related policies, in proportion to the ratio of annual premium revenues to total anticipated premium revenues. Such anticipated premium revenues were estimated using the same assumptions used for computing liabilities for future policy benefits.

Present Value of Future Profits

These amounts are amortized with interest over the estimated remaining life of the acquired policies for annuities and universal life products and over the expected premium paying period for traditional life and health insurance products.

7

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



Annuity Benefits Accumulated

Life, Accident and Health Reserves

The liability for future policy benefits for interest sensitive life and universal life policies is equal to the sum of the accumulated fund balances under such policies.

Variable Annuity Assets and Liabilities

Life, Accident and Health Premiums and Benefits

For interest sensitive life and universal life products, premiums are recorded in a policyholder account which is reflected as a liability. Revenue is recognized as amounts are assessed against the policyholder account for mortality coverage and contract expenses. Surrender benefits reduce the account value. Death benefits are expensed when incurred, net of the account value.

Income Taxes

Deferred income tax assets and liabilities are determined based on differences between financial reporting and tax basis and are measured using enacted tax rates. The Company recognizes deferred tax assets if it is more likely than not that a benefit will be realized. Current and deferred tax assets and liabilities of companies in AFC's consolidated tax group are aggregated with other amounts receivable from or payable to affiliates.

8

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



Stock-Based Compensation

Benefit Plans

Qualified employees having vested rights in the plan are entitled to benefit payments at age 60.

GAFRI and certain of its subsidiaries provide certain benefits to eligible retirees. The projected future cost of providing these benefits is expensed over the period the employees earn such benefits.

Derivatives

Derivatives included in GAFRI's balance sheet consist primarily of investments in common stock warrants (included in equity securities), the equity-based component of certain annuity products (included in annuity benefits accumulated) and call options (included in other assets) used to mitigate the risk embedded in the equity-indexed annuity products.

Earnings Per Share

Statement of Cash Flows

9

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



C.	Segments of Operations

GAFRI's life and annuity operations offer fixed and variable annuity products and traditional life insurance products.  GAFRI's annuity products are sold through managing general agents and independent agents to employees of primary and secondary educational institutions, hospitals and in the non-qualified markets.  Traditional term, universal and whole life insurance products are sold through national marketing organizations.

GAFRI's supplemental insurance businesses, United Teacher Associates Insurance Company ("UTA") and Loyal American Life Insurance Company, offer a variety of supplemental health and life products.  Loyal's marketing strategy emphasizes third-party sponsorship, including employers and credit unions, while UTA offers its products through independent agents.

GA Life of Puerto Rico sells in-home life and supplemental health products through a network of company-employed agents.  Sales in Puerto Rico accounted for approximately 20% of GAFRI's life, accident and health premiums in the first nine months of 2001 and 2000.

Corporate and other consists primarily of GAFRI (parent) and AAG Holding.

The following table shows GAFRI's revenues and operating profit by significant business segment (in millions):



|                                                           | Three months ended | Nine months ended
|---------------------------------------------------------- | ------------------ | -----------------
|                                                           | September 30,      | September 30,    
|                                                           | 2001               | 2000             
|                                                           |                    |                  
|Revenues                                                   |                    |                  
|Life and annuity products                                  | $147.8             | $143.2           
|Supplemental insurance products                            | 57.1               | 57.6             
|GA Life of Puerto Rico                                     | 16.3               | 14.7             
|Corporate and other                                        | 2.4                | 2.2              
|Total operating revenues                                   | 223.6              | 217.7            
|                                                           |                    |                  
|Realized gains (losses)                                    | (1.3)              | 18.5             
|Total revenues per income statement                        | $222.3             | $236.2           
|                                                           |                    |                  
|                                                           |                    |                  
|Operating profit - pretax                                  |                    |                  
|Life and annuity products (excluding
  litigation charges) | $ 31.7             | $ 35.4           
|Supplemental insurance products                            | -                  | 0.5              
|GA Life of Puerto Rico                                     | 2.7                | 2.5              
|Litigation charges                                         | -                  | -                
|Corporate and other                                        | (6.2)              | (9.9)            
|Pretax earnings from operations                            | 28.2               | 28.5             
|                                                           |                    |                  
|Realized gains (losses)                                    | (1.3)              | 18.5             
|Total pretax income per income                             |                    |                  
|statement                                                  | $ 26.9             | $ 47.0           

10

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



D.	Investment in Affiliate

Investment in affiliate at December 31, 2000, reflects GAFRI's 4% ownership (2.7 million shares) of the common stock of Chiquita Brands International. AFG and its other subsidiaries own an additional 28% interest in the common stock of Chiquita. Chiquita is a leading international marketer, producer and distributor of quality fresh fruits and vegetables and processed foods.

In January 2001, Chiquita announced a restructuring initiative that included discontinuing all interest and principal payments on its public debt. A restructuring is expected to result in the conversion of a significant portion of Chiquita's $862 million in public debt into common equity.

The market value of GAFRI's investment in Chiquita was approximately $2.7 million at December 31, 2000.

E.	Unamortized Insurance Acquisition Costs

Unamortized insurance acquisition costs consisted of the following (in millions):



|                                         | September 30, | December 31,
|---------------------------------------- | ------------- | ------------
|                                         | 2001          | 2000        
|                                         |              
|Deferred policy acquisition costs        | $589.6        | $536.9      
|Present value of future profits acquired | 85.9          | 93.4        
|Unearned revenues                        | (134.2)       | (142.4)     
|                                         | $541.3        | $487.9      

F.	Notes Payable

Notes payable consisted of the following (in millions):





|                                                  | September 30, | December 31,
|------------------------------------------------- | ------------- | ------------
|                                                  | 2001          | 2000        
|                                                  |              
|Direct obligations of GAFRI                       | $  1.7        | $  2.0      
|Obligations of AAG Holding (guaranteed by GAFRI): |               |             
|6-7/8% Senior Notes due 2008                      | 100.0         | 100.0       
|Bank Credit Line                                  | 121.1         | 48.5        
|Other subsidiary debt                             | 1.2           | 1.4         
|Total                                             | $224.0        | $151.9      

In January 2001, AAG Holding replaced its existing bank line with a $155 million unsecured credit agreement. Loans under the credit agreement mature on December 31, 2004. At September 30, 2001, the weighted-average interest rate on amounts borrowed under its credit line was 3.74%.

In September 2001, GAFRI borrowed under its credit agreement in connection with the redemption of its ROPES.

11

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



At September 30, 2001, scheduled principal payments on debt for the remainder of 2001 and the subsequent five years were as follows (in millions):



|2001 | 2002 | 2003 | 2004   | 2005 | 2006
|---- | ---- | ---- | ------ | ---- | ----
|$0.2 | $0.7 | $0.6 | $121.3 | $0.2 | $0.2

G.	Mandatorily Redeemable Preferred Securities of Subsidiary Trusts

Wholly-owned subsidiary trusts of GAFRI issued $225 million of preferred securities and, in turn, purchased a like amount of subordinated debt which provides interest and principal payments to fund the Trusts' obligations. The preferred securities are mandatorily redeemable upon maturity or redemption of the subordinated debt.  GAFRI effectively provides an unconditional guarantee of the Trusts' obligations. The three preferred securities issues are summarized as follows:



|Date of       |                       |             |             | Optional             
|------------- | --------------------- | ----------- | ----------- | ---------------------
|Issuance      | Issue (Maturity Date) | 09/30/01    | 12/31/00    | Redemption Dates     
|November 1996 | 9-1/4% TOPrS*  (2026) | $72,912,500 | $72,912,500 | On or after 11/7/2001
|March 1997    | 8-7/8% Pfd     (2027) | 70,000,000  | 70,000,000  | On or after 3/1/2007 
|May 1997      | 7-1/4% ROPES** (2041) | -           | 75,000,000  | Redeemed 9/28/2001   



*  Trust Originated Preferred Securities

** Remarketed Par Securities

H.	Stockholders' Equity

The Company is authorized to issue 25,000,000 shares of Preferred Stock, par value $1.00 per share.

At September 30, 2001, there were 4.0 million shares of GAFRI Common Stock reserved for issuance under GAFRI's stock option plans. Under the plans, the exercise price of each option equals the market price of GAFRI Common Stock at the date of grant. Options generally become exercisable at the rate of 20% per year commencing one year after grant. All options expire ten years after the date of grant.

The change in net unrealized gains on marketable securities for the nine months ended September 30 included the following (in millions):



|                                                                   | 2001   | 2000   
|------------------------------------------------------------------ | ------ | -------
|                                                                   | Pretax | Taxes  
|Unrealized holding gains on securities
  arising during the period | $129.6 | ($44.8)
|Realized losses (gains) on securities                              | 24.3   | (8.5)  
|Change in net unrealized gains on
  marketable securities          | $153.9 | ($53.3)

12

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



I.	Earnings Per Share

The number of common shares outstanding used in calculating diluted earnings per share in both the third quarter and first nine months of 2001 includes 0.4 million shares compared to 0.5 million shares for the third quarter of 2000 and 0.4 million shares for the first nine months of 2000 for the effect of the assumed exercise of GAFRI's dilutive stock options.

J.	Contingencies

In March 2000, a jury in Dallas, Texas, returned a verdict against GALIC with total damages of $11.2 million in a lawsuit brought by two former agents of GALIC. The former agents had alleged that their agency agreement with GALIC had been wrongfully terminated. The Company believes the verdict was contrary to both the facts and the law and expects to prevail on appeal. The ultimate outcome of this case will not have a material adverse impact on the financial condition of the Company.

K.	Additional Information

Statutory Information of Great American Life Insurance Company

|                                | September 30, | December 31,
|------------------------------- | ------------- | ------------
|                                | 2001          | 2000        
|Capital and surplus             | $335.0        | $362.5      
|Asset valuation reserve         | 81.4          | 75.6        
|Interest maintenance reserve    | 4.4           | 3.3         
|                                |               |             
|Nine months ended September 30,
|                                | 2001          | 2000        
|Pretax income from operations   | $62.8         | $64.1       
|Net income from operations      | 39.6          | 50.4        
|Net income                      | 24.1          | 47.5        

The amount of dividends which can be paid by GALIC without prior approval of regulatory authorities is subject to restrictions relating to capital and surplus and statutory net income. Based on net income for the year ended December 31, 2000, GALIC may pay $52.1 million in dividends in 2001 without prior approval. In the first nine months of 2001, GALIC paid $18.0 million in dividends.

13

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



|Condensed Consolidating InformationGAFRI has guaranteed all of the outstanding debt of AAG Holding and the preferred securities of the Trusts. Condensed consolidating financial statements for GAFRI are as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

CONDENSED CONSOLIDATING BALANCE SHEET

(In millions)



|                                                                      |        | AAG      | TOTAL  | ALL OTHER | CONS       | TOTAL   
|--------------------------------------------------------------------- | ------ | -------- | ------ | --------- | ---------- | --------
|SEPTEMBER 30, 2001                                                    | GAFRI  | HOLDING  | TRUSTS | SUBS      | ENTRIES    | CONS    
|                                                                      |        |          |        |           |            |         
|Assets                                                                |        |          |        |           |            |         
|Cash and investments                                                  | $ 21.3 | $     -  | $   -  | $7,003.0  | ($   16.2) | $7,008.1
|Investment in subsidiaries                                            | 728.5  | 1,108.3  | -      | 0.9       | (1,837.7)  | -       
|Notes receivable from AAG Holding                                     | 102.4  | -        | 154.6  | -         | (257.0)    | -       
|Unamortized insurance acquisition 
    costs, net                     | -      | -        | -      | 541.3     | -          | 541.3   
|Other assets                                                          | 25.5   | 15.8     | 2.9    | 259.6     | 37.3       | 341.1   
|Variable annuity assets (separate
    accounts)                       | -      | -        | -      | 453.8     | -          | 453.8   
|                                                                      | $877.7 | $1,124.1 | $157.5 | $8,258.6  | ($2,073.6) | $8,344.3
|                                                                      |        |          |        |           |            |         
|Liabilities and Capital                                               |        |          |        |           |            |         
|Insurance liabilities                                                 | $   -  | $     -  | $   -  | $6,336.9  | ($    4.7) | $6,332.2
|Notes payable to GAFRI                                                | -      | 102.4    | -      | 0.1       | (102.5)    | -       
|Notes payable to Trusts                                               | -      | 154.6    | -      | -         | (154.6)    | -       
|Other notes payable                                                   | 1.9    | 221.2    | -      | 1.0       | (0.1)      | 224.0   
|Other liabilities                                                     | 67.4   | -        | 2.9    | 328.3     | (15.6)     | 383.0   
|Variable annuity liabilities
    (separate accounts)                  | -      | -        | -      | 453.8     | -          | 453.8   
|                                                                      | 69.3   | 478.2    | 2.9    | 7,120.1   | (277.5)    | 7,393.0 
|                                                                      |        |          |        |           |            |         
|Mandatorily redeemable preferred 
    securities of subsidiary trusts | -      | -        | 150.0  | -         | (7.1)      | 142.9   
|                                                                      |        |          |        |           |            |         
|Total stockholders' equity                                            | 808.4  | 645.9    | 4.6    | 1,138.5   | (1,789.0)  | 808.4   
|                                                                      | $877.7 | $1,124.1 | $157.5 | $8,258.6  | ($2,073.6) | $8,344.3



|                                                                      |        |        |        |          |            |         
|--------------------------------------------------------------------- | ------ | ------ | ------ | -------- | ---------- | --------
|DECEMBER 31, 2000                                                     |        |        |        |          |            |         
|                                                                      |        |        |        |          |            |         
|Assets                                                                |        |        |        |          |            |         
|Cash and investments                                                  | $ 30.0 | $   -  | $   -  | $6,571.4 | ($   16.1) | $6,585.3
|Investment in subsidiaries                                            | 580.6  | 978.8  | -      | 1.0      | (1,560.4)  | -       
|Notes receivable from AAG Holding                                     | 102.4  | -      | 232.0  | -        | (334.4)    | -       
|Unamortized insurance acquisition 
    costs, net                     | -      | -      | -      | 487.9    | -          | 487.9   
|Other assets                                                          | 30.5   | 11.8   | 6.0    | 291.7    | 29.0       | 369.0   
|Variable annuity assets (separate
    accounts)                       | -      | -      | -      | 533.7    | -          | 533.7   
|                                                                      | $743.5 | $990.6 | $238.0 | $7,885.7 | ($1,881.9) | $7,975.9
|                                                                      |        |        |        |          |            |         
|Liabilities and Capital                                               |        |        |        |          |            |         
|Insurance liabilities                                                 | $   -  | $   -  | $   -  | $6,147.8 | $   (4.7)  | $6,143.1
|Notes payable to GAFRI                                                | -      | 102.4  | -      | 0.1      | (102.5)    | -       
|Notes payable to Trusts                                               | -      | 232.0  | -      | -        | (232.0)    | -       
|Other notes payable                                                   | 2.0    | 148.5  | -      | 1.4      | -          | 151.9   
|Other liabilities                                                     | 69.8   | -      | 6.1    | 208.8    | (27.1)     | 257.6   
|Variable annuity liabilities
    (separate accounts)                  | -      | -      | -      | 533.7    | -          | 533.7   
|                                                                      | 71.8   | 482.9  | 6.1    | 6,891.8  | (366.3)    | 7,086.3 
|                                                                      |        |        |        |          |            |         
|Mandatorily redeemable preferred 
    securities of subsidiary trusts | -      | -      | 225.0  | -        | (7.1)      | 217.9   
|                                                                      |        |        |        |          |            |         
|Total stockholders' equity                                            | 671.7  | 507.7  | 6.9    | 993.9    | (1,508.5)  | 671.7   
|                                                                      | $743.5 | $990.6 | $238.0 | $7,885.7 | ($1,881.9) | $7,975.9

14

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

CONDENSED CONSOLIDATING INCOME STATEMENT

(In millions)



|FOR THE THREE MONTHS ENDING             |       | AAG     | TOTAL  | ALL OTHER | CONS    | TOTAL 
|--------------------------------------- | ----- | ------- | ------ | --------- | ------- | ------
|SEPTEMBER 30, 2001                      | GAFRI | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS  
|                                        |       |         |        |           |         |       
|Revenues:                               |       |         |        |           |         |       
|Life, accident and health premiums      | $  -  | $  -    | $ -    | $ 69.1    | $  -    | $ 69.1
|Net investment income and other revenue | 6.5   | -       | -      | 152.4     | (5.7)   | 153.2 
|Interest income on AAG Holding notes    | -     | -       | 4.9    | -         | (4.9)   | -     
|Equity in earnings of subsidiaries      | 23.3  | 32.0    | -      | -         | (55.3)  | -     
|                                        | 29.8  | 32.0    | 4.9    | 221.5     | (65.9)  | 222.3 
|                                        |       |         |        |           |         |       
|Costs and Expenses:                     |       |         |        |           |         |       
|Insurance benefits and expenses         | -     | -       | -      | 150.8     | -       | 150.8 
|Interest expense on AAG Holding notes   | -     | 4.9     | -      | -         | (4.9)   | -     
|Other interest and debt expenses        | -     | 4.9     | -      | -         | 2.1     | 7.0   
|Other expenses                          | 2.9   | 1.7     | -      | 36.2      | (3.2)   | 37.6  
|                                        | 2.9   | 11.5    | -      | 187.0     | (6.0)   | 195.4 
|                                        |       |         |        |           |         |       
|Operating earnings before income taxes  | 26.9  | 20.5    | 4.9    | 34.5      | (59.9)  | 26.9  
|Provision for income taxes              | 8.5   | 7.1     | -      | 10.7      | (17.8)  | 8.5   
|                                        |       |         |        |           |         |       
|Net income                              | $18.4 | $13.4   | $4.9   | $ 23.8    | ($42.1) | $ 18.4





|FOR THE NINE MONTHS ENDING                             |       |       |       |        |          |       
|------------------------------------------------------ | ----- | ----- | ----- | ------ | -------- | ------
|SEPTEMBER 30, 2001                                     |       |       |       |        |          |       
|                                                       |       |       |       |        |          |       
|Revenues:                                              |       |       |       |        |          |       
|Life, accident and health premiums                     | $  -  | $  -  | $  -  | $208.8 | $   -    | $208.8
|Net investment income and other revenue                | 19.9  | -     | -     | 422.5  | (15.3)   | 427.1 
|Interest income on AAG Holding notes                   | -     | -     | 14.7  | -      | (14.7)   | -     
|Equity in earnings of subsidiaries                     | 50.6  | 79.0  | -     | -      | (129.6)  | -     
|                                                       | 70.5  | 79.0  | 14.7  | 631.3  | (159.6)  | 635.9 
|                                                       |       |       |       |        |          |       
|Costs and Expenses:                                    |       |       |       |        |          |       
|Insurance benefits and expenses                        | -     | -     | -     | 438.2  | -        | 438.2 
|Interest expense on AAG Holding notes                  | -     | 14.7  | -     | -      | (14.7)   | -     
|Other interest and debt expenses                       | 0.1   | 15.1  | -     | -      | 6.5      | 21.7  
|Other expenses                                         | 10.2  | 6.4   | -     | 106.8  | (7.6)    | 115.8 
|                                                       | 10.3  | 36.2  | -     | 545.0  | (15.8)   | 575.7 
|                                                       |       |       |       |        |          |       
|Operating earnings before income taxes                 | 60.2  | 42.8  | 14.7  | 86.3   | (143.8)  | 60.2  
|Provision for income taxes                             | 18.3  | 14.6  | -     | 26.0   | (40.6)   | 18.3  
|                                                       |       |       |       |        |          |       
|Income before accounting change                        | 41.9  | 28.2  | 14.7  | 60.3   | (103.2)  | 41.9  
|                                                       |       |       |       |        |          |       
|Cumulative effect of accounting change,
    net of tax | (5.5) | -     | -     | (5.5)  | 5.5      | (5.5) 
|                                                       |       |       |       |        |          |       
|Net income                                             | $36.4 | $28.2 | $14.7 | $ 54.8 | ($ 97.7) | $ 36.4



15

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

CONDENSED CONSOLIDATING INCOME STATEMENT

(In millions)



|FOR THE THREE MONTHS ENDING             |       | AAG     | TOTAL  | ALL OTHER | CONS    | TOTAL 
|--------------------------------------- | ----- | ------- | ------ | --------- | ------- | ------
|SEPTEMBER 30, 2000                      | GAFRI | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS  
|                                        |       |         |        |           |         |       
|Revenues:                               |       |         |        |           |         |       
|Life, accident and health premiums      | $  -  | $  -    | $ -    | $ 66.5    | $ -     | $ 66.5
|Net investment income and other revenue | 33.7  | -       | -      | 141.3     | (5.3)   | 169.7 
|Interest income on AAG Holding notes    | -     | -       | 4.9    | -         | (4.9)   | -     
|Equity in earnings of subsidiaries      | 15.3  | 58.8    | -      | -         | (74.1)  | -     
|                                        | 49.0  | 58.8    | 4.9    | 207.8     | (84.3)  | 236.2 
|                                        |       |         |        |           |         |       
|Costs and Expenses:                     |       |         |        |           |         |       
|Insurance benefits and expenses         | -     | -       | -      | 139.7     | -       | 139.7 
|Interest expense on AAG Holding notes   | -     | 4.9     | -      | -         | (4.9)   | -     
|Other interest and debt expenses        | -     | 6.1     | -      | -         | 2.1     | 8.2   
|Other expenses                          | 2.0   | 4.2     | -      | 37.7      | (2.6)   | 41.3  
|                                        | 2.0   | 15.2    | -      | 177.4     | (5.4)   | 189.2 
|                                        |       |         |        |           |         |       
|Operating earnings before income taxes  | 47.0  | 43.6    | 4.9    | 30.4      | (78.9)  | 47.0  
|Provision for income taxes              | 15.0  | 15.5    | -      | 10.2      | (25.7)  | 15.0  
|                                        |       |         |        |           |         |       
|Net operating earnings                  | 32.0  | 28.1    | 4.9    | 20.2      | (53.2)  | 32.0  
|                                        |       |         |        |           |         |       
|Equity in loss of affiliate, net of tax | (1.5) | -       | -      | -         | -       | (1.5) 
|                                        |       |         |        |           |         |       
|Net income                              | $30.5 | $28.1   | $4.9   | $ 20.2    | ($53.2) | $ 30.5





|FOR THE NINE MONTHS ENDING              |       |       |       |        |         |       
|--------------------------------------- | ----- | ----- | ----- | ------ | ------- | ------
|SEPTEMBER 30, 2000                      |       |       |       |        |         |       
|                                        |       |       |       |        |         |       
|Revenues:                               |       |       |       |        |         |       
|Life, accident and health premiums      | $  -  | $  -  | $ -   | $166.1 | $  -    | $166.1
|Net investment income and other revenue | 47.9  | -     | -     | 421.6  | (16.5)  | 453.0 
|Interest income on AAG Holding notes    | -     | -     | 14.7  | -      | (14.7)  | -     
|Equity in earnings of subsidiaries      | 24.5  | 89.4  | -     | -      | (113.9) | -     
|                                        | 72.4  | 89.4  | 14.7  | 587.7  | (145.1) | 619.1 
|                                        |       |       |       |        |         |       
|Costs and Expenses:                     |       |       |       |        |         |       
|Insurance benefits and expenses         | -     | -     | -     | 393.1  | -       | 393.1 
|Interest expense on AAG Holding notes   | -     | 14.7  | -     | -      | (14.7)  | -     
|Other interest and debt expenses        | 0.1   | 18.1  | -     | 0.1    | 6.4     | 24.7  
|Other expenses                          | 8.3   | 9.7   | -     | 127.6  | (8.3)   | 137.3 
|                                        | 8.4   | 42.5  | -     | 520.8  | (16.6)  | 555.1 
|                                        |       |       |       |        |         |       
|Operating earnings before income taxes  | 64.0  | 46.9  | 14.7  | 66.9   | (128.5) | 64.0  
|Provision for income taxes              | 17.5  | 16.5  | -     | 21.4   | (37.9)  | 17.5  
|                                        |       |       |       |        |         |       
|Net operating earnings                  | 46.5  | 30.4  | 14.7  | 45.5   | (90.6)  | 46.5  
|                                        |       |       |       |        |         |       
|Equity in loss of affiliate, net of tax | (0.5) | -     | -     | -      | -       | (0.5) 
|                                        |       |       |       |        |         |       
|Net income                              | $46.0 | $30.4 | $14.7 | $ 45.5 | ($90.6) | $ 46.0

16

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In millions)



|FOR THE NINE MONTHS ENDING                                            |        | AAG     | TOTAL  | ALL OTHER | CONS    | TOTAL  
|--------------------------------------------------------------------- | ------ | ------- | ------ | --------- | ------- | -------
|SEPTEMBER 30, 2001                                                    | GAFRI  | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS   
|                                                                      |        |         |        |           |         |        
|Cash Flows from Operating Activities:                                 |        |         |        |           |         |        
|Net income                                                            | $36.4  | $28.2   | $14.7  | $ 54.8    | ($97.7) | $ 36.4 
|Adjustments:                                                          |        |         |        |           |         |        
|Cumulative effect of accounting
      change                          | 5.5    | -       | -      | 5.5       | (5.5)   | 5.5    
|Equity in undistributed earnings of
      subsidiaries and affiliates | (35.8) | (34.0)  | -      | -         | 69.8    | -      
|Increase in life, accident and health
      reserves                  | -      | -       | -      | 34.2      | -       | 34.2   
|Benefits to annuity policyholders                                     | -      | -       | -      | 214.0     | -       | 214.0  
|Amortization of insurance acquisition
      costs                     | -      | -       | -      | 64.0      | -       | 64.0   
|Depreciation and amortization                                         | 0.5    | 3.7     | -      | 4.7       | -       | 8.9    
|Realized losses                                                       | 2.7    | -       | -      | 23.1      | -       | 25.8   
|Increase in insurance acquisition
      costs                         | -      | -       | -      | (111.4)   | -       | (111.4)
|Other, net                                                            | 2.6    | (15.0)  | -      | 0.7       | (1.5)   | (13.2) 
|                                                                      | 11.9   | (17.1)  | 14.7   | 289.6     | (34.9)  | 264.2  
|                                                                      |        |         |        |           |         |        
|Cash Flows from Investing Activities:                                 |        |         |        |           |         |        
|Purchases of investments and other 
    assets                        | -      | -       | -      | (898.1)   | -       | (898.1)
|Maturities and redemptions of fixed 
    maturity investments         | -      | -       | -      | 387.3     | -       | 387.3  
|Sales of investments and other assets                                 | 7.7    | -       | -      | 323.2     | -       | 330.9  
|Decrease in policy loans                                              | -      | -       | -      | (1.3)     | -       | (1.3)  
|Decrease in intercompany notes
    receivable                         | (1.5)  | -       | -      | -         | 1.5     | -      
|                                                                      | 6.2    | -       | -      | (188.9)   | 1.5     | (181.2)
|                                                                      |        |         |        |           |         |        
|Cash Flows from Financing Activities:                                 |        |         |        |           |         |        
|Fixed annuity receipts                                                | -      | -       | -      | 454.2     | -       | 454.2  
|Annuity surrenders, benefits and
    withdrawals                      | -      | -       | -      | (483.0)   | -       | (483.0)
|Net transfers from variable annuity
    assets                        | -      | -       | -      | 3.2       | -       | 3.2    
|Additions to notes payable                                            | 0.1    | 87.4    | -      | -         | -       | 87.5   
|Reductions of notes payable                                           | (0.2)  | (14.8)  | -      | (0.4)     | -       | (15.4) 
|Issuance of Common Stock                                              | 0.5    | -       | -      | -         | -       | 0.5    
|Capital contribution from parent (to
    subsidiary)                  | (19.5) | 19.5    | -      | (18.7)    | 18.7    | -      
|Retirement of Common Stock                                            | (0.3)  | -       | -      | -         | -       | (0.3)  
|Redemption of ROPES                                                   | -      | (75.0)  | -      | -         | -       | (75.0) 
|Trust dividend requirements                                           | -      | -       | (14.7) | -         | 14.7    | -      
|                                                                      | (19.4) | 17.1    | (14.7) | (44.7)    | 33.4    | (28.3) 
|                                                                      |        |         |        |           |         |        
|Net increase (decrease) in cash and 
  short-term investments         | (1.3)  | -       | -      | 56.0      | -       | 54.7   
|Beginning cash and short-term investments                             | 3.2    | -       | -      | 84.3      | -       | 87.5   
|                                                                      |        |         |        |           |         |        
|Ending cash and short-term investments                                | $ 1.9  | $  -    | $ -    | $140.3    | $  -    | $142.2 

17

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In millions)



|FOR THE NINE MONTHS ENDING                                            |        | AAG     | TOTAL  | ALL OTHER | CONS    | TOTAL  
|--------------------------------------------------------------------- | ------ | ------- | ------ | --------- | ------- | -------
|SEPTEMBER 30, 2000                                                    | GAFRI  | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS   
|                                                                      |        |         |        |           |         |        
|Cash Flows from Operating Activities:                                 |        |         |        |           |         |        
|Net income                                                            | $46.0  | $30.4   | $14.7  | $ 45.5    | ($90.6) | $ 46.0 
|Adjustments:                                                          |        |         |        |           |         |        
|Equity in undistributed earnings of
      subsidiaries and affiliates | (15.0) | (20.1)  | -      | -         | 35.6    | 0.5    
|Increase in life, accident and health
      reserves                  | -      | -       | -      | 67.1      | -       | 67.1   
|Benefits to annuity policyholders                                     | -      | -       | -      | 203.8     | -       | 203.8  
|Amortization of insurance acquisition
      costs                     | -      | -       | -      | 50.8      | -       | 50.8   
|Depreciation and amortization                                         | 0.7    | 5.8     | -      | 0.3       | -       | 6.8    
|Realized (gains) losses                                               | (27.5) | -       | -      | 12.7      | -       | (14.8) 
|Increase in insurance acquisition
      costs                         | -      | -       | -      | (106.8)   | -       | (106.8)
|Other, net                                                            | 9.1    | (8.7)   | -      | (2.9)     | (2.0)   | (4.5)  
|                                                                      | 13.3   | 7.4     | 14.7   | 270.5     | (57.0)  | 248.9  
|                                                                      |        |         |        |           |         |        
|Cash Flows from Investing Activities:                                 |        |         |        |           |         |        
|Purchases of investments and other 
    assets                        | (2.5)  | -       | -      | (593.9)   | -       | (596.4)
|Maturities and redemptions of fixed 
    maturity investments         | 0.6    | -       | -      | 317.7     | -       | 318.3  
|Sales of investments and other assets                                 | 35.8   | -       | -      | 245.8     | -       | 281.6  
|Decrease in policy loans                                              | -      | -       | -      | 2.5       | -       | 2.5    
|Decrease in intercompany notes
    receivable                         | 0.1    | -       | -      | -         | (0.1)   | -      
|                                                                      | 34.0   | -       | -      | (27.9)    | (0.1)   | 6.0    
|                                                                      |        |         |        |           |         |        
|Cash Flows from Financing Activities:                                 |        |         |        |           |         |        
|Fixed annuity receipts                                                | -      | -       | -      | 359.9     | -       | 359.9  
|Annuity surrenders, benefits and
    withdrawals                      | -      | -       | -      | (564.5)   | -       | (564.5)
|Net transfers to variable annuity
    assets                          | -      | -       | -      | (44.3)    | -       | (44.3) 
|Additions to notes payable                                            | -      | 2.0     | -      | -         | -       | 2.0    
|Reductions of notes payable                                           | (0.2)  | (50.5)  | -      | (0.5)     | -       | (51.2) 
|Issuance of Common Stock                                              | 0.6    | -       | -      | -         | -       | 0.6    
|Capital contribution from parent (to
    subsidiary)                  | (41.1) | 41.1    | -      | (42.4)    | 42.4    | -      
|Retirement of Common Stock                                            | (1.9)  | -       | -      | -         | -       | (1.9)  
|Repurchase of trust preferred
    securities                          | -      | -       | -      | (1.4)     | -       | (1.4)  
|Trust dividend requirements                                           | -      | -       | (14.7) | -         | 14.7    | -      
|                                                                      | (42.6) | (7.4)   | (14.7) | (293.2)   | 57.1    | (300.8)
|                                                                      |        |         |        |           |         |        
|Net increase (decrease) in cash and 
  short-term investments         | 4.7    | -       | -      | (50.6)    | -       | (45.9) 
|Beginning cash and short-term investments                             | 1.1    | -       | -      | 118.5     | -       | 119.6  
|                                                                      |        |         |        |           |         |        
|Ending cash and short-term investments                                | $ 5.8  | $  -    | $  -   | $ 67.9    | $  -    | $ 73.7 

18

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

Management's Discussion and Analysis

of Financial Condition and Results of Operations

GENERAL

Great American Financial Resources, Inc. ("GAFRI" or "the Company") and its subsidiary, AAG Holding Company, Inc., are organized as holding companies with nearly all of their operations being conducted by their subsidiaries. These companies, however, have continuing expenditures for administrative expenses, corporate services and for the payment of interest and principal on borrowings and stockholder dividends.

Forward-Looking Statements

- changes in economic conditions, including interest rates, performance of securities markets, and the availability of capital;
- regulatory actions;
- changes in legal environment;
- tax law changes;
- availability of reinsurance; and
- competitive pressures.

Forward-looking statements included in this Form 10-Q are made only as of the date of this report and under Section 27A of The Securities Act and Section 21E of The Exchange Act; we do not have any obligation to update any forward-looking statement to reflect subsequent events or circumstances.

LIQUIDITY AND CAPITAL RESOURCES

Ratios   GAFRI's consolidated debt to capital ratio was 22% at September 30, 2001. Capital represents the sum of consolidated debt, redeemable preferred securities of subsidiary trusts and stockholders' equity (excluding unrealized gains on marketable securities).

The National Association of Insurance Commissioners' ("NAIC") risk-based capital ("RBC") formulas determine the amount of capital that an insurance company needs to ensure that it has an acceptable expectation of not becoming financially impaired. At September 30, 2001, the capital ratio of GAFRI's principal insurance subsidiary was 4.1 times its authorized control level RBC.

19

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

Sources and Uses of Funds

In the third quarter of 2000, GAFRI paid down approximately $50 million of its bank credit line using cash on hand. In January 2001, the Company replaced its existing agreement with a $155 million unsecured credit agreement which matures on December 31, 2004. In September 2001, GAFRI redeemed its ROPES for $75 million in cash using bank borrowings. At September 30, 2001, GAFRI (parent) had over $30 million available under its bank credit line.

Based upon the current level of operations and anticipated growth, GAFRI believes that it will have sufficient resources to meet its liquidity requirements.

Investments

The NAIC assigns quality ratings to publicly traded as well as privately placed securities. At September 30, 2001, 92% of GAFRI's fixed maturity portfolio was comprised of investment grade bonds (NAIC rating of "1" or "2"). Management believes that the high credit quality of GAFRI's investment portfolio should generate a stable and predictable investment return.

At September 30, 2001, GAFRI's mortgage-backed securities ("MBSs") portfolio represented approximately one-third of its fixed maturity investments. GAFRI invests primarily in MBSs which have a lower risk of prepayment. In addition, the majority of MBSs held by GAFRI were purchased at a discount. Management believes that the structure and discounted nature of the MBSs will reduce the effect of prepayments on earnings over the anticipated life of the MBS portfolio.

More than 90% of GAFRI's MBSs are rated "AAA" with substantially all being investment grade quality. The market in which these securities trade is highly liquid. Aside from interest rate risk, GAFRI does not believe a material risk (relative to earnings or liquidity) is inherent in holding such investments.



20

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

RESULTS OF OPERATIONS

General

|                                                                | Three months ended
September 30, | Nine months ended
September 30,
|--------------------------------------------------------------- | -------------------------------- | -------------------------------
|GAFRI (Consolidated):                                           | 2001                             | 2000                           
|Revenues per income statement                                   | $222.3                           | $236.2                         
|Add back (subtract) realized losses
     (gains)                | 1.3                              | (18.5)                         
|Core operating revenues                                         | 223.6                            | 217.7                          
|                                                                |                                  |                                
|Expenses per income statement                                   | 195.4                            | 189.2                          
|Less litigation charges included in
     annuity benefits       | -                                | -                              
|Less litigation charges included in
     other expenses         | -                                | -                              
|Core operating expenses                                         | 195.4                            | 189.2                          
|                                                                |                                  |                                
|Core operating earnings before tax                              | 28.2                             | 28.5                           
|Income tax expense                                              | 9.0                              | 8.5                            
|Net core operating earnings                                     | $ 19.2                           | $ 20.0                         
|                                                                |                                  |                                
|Net core operating earnings per
         common share (diluted) | $ 0.45                           | $ 0.47                         

Retirement Products

|Three months ended                    | Nine months ended
|------------------------------------- | -----------------
|September 30,                         | September 30,    
|                                      | 2001             
|Annuity Premiums                      |                  
|Single premium fixed rate annuities   | $130             
|Flexible premium fixed rate annuities | 32               
|Single premium variable annuities     | 29               
|Flexible premium variable annuities   | 20               
|                                      | $211             

Sales of variable annuity products linked to the performance of the stock market were down substantially in the third quarter and first nine months of 2001 compared to the same periods in 2000. Management believes this decrease was attributable to the volatile equity markets.



21

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

Life, Accident and Health Premiums and Benefits

|Three months ended              | Nine months ended
|------------------------------- | -----------------
|September 30,                   | September 30,    
|                                | 2001             
|Premiums                        |                  
|Supplemental insurance products | $46              
|GA Life of Puerto Rico          | 14               
|Life products                   | 9                
|                                | $69              
|                                |                  
|Benefits                        |                  
|Supplemental insurance products | $40              
|GA Life of Puerto Rico          | 7                
|Life products                   | 7                
|                                | $54              

The increase in supplemental insurance premiums reflects the acquisition of a block of business in 2000.

Real Estate Operations

|Three months ended | Nine months ended
|------------------ | -----------------
|September 30,      | September 30,    
|                   | 2001             
|Other income       | $13.8            
|Other expenses     | 9.7              

Other income included a pretax gain on the sale of real estate assets of $10.6 million in the first nine months of 2001.

Other Income

Realized Gains (Losses)

In September 2000, GAFRI realized a pre-tax gain of $27.2 million on the sale of its investment in a company engaged in the production of ethanol.

Annuity Benefits

22

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

On its deferred annuities (annuities in the accumulation phase), GAFRI generally credits interest to policyholders' accounts at their current stated "surrender" interest rates. Furthermore, for "two-tier" deferred annuities (annuities under which a higher interest amount can be earned if a policy is annuitized rather than surrendered), GAFRI accrues an additional liability to provide for expected deaths and annuitizations. Changes in crediting rates, actual surrender and annuitization experience or modifications in actuarial assumptions can affect this accrual.

GAFRI's equity-indexed fixed annuities provide policyholders with a crediting rate tied, in part, to the performance of an existing stock market index. GAFRI attempts to mitigate the risk in the equity-based component of these products through the purchase of call options on the appropriate index. GAFRI's strategy is designed so that an increase in the liabilities due to an increase in the market index will be substantially offset by unrealized gains on the call options. Under SFAS No. 133, both the equity-based component of the annuities and the related call options are considered derivatives and marked to market through current earnings as annuity benefits. Adjusting these derivatives to market value had less than a $1 million net effect on annuity benefits in the first nine months of 2001.

Insurance Acquisition Expenses

Interest and Other Debt Expenses

Other Expenses

Equity in Loss of Affiliate

Cumulative Effect of Accounting Change



23

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

Recent Accounting Standards



______________________________________________________________________

PART II

OTHER INFORMATION

Item 3

Quantitative and Qualitative Disclosure at Market Risk

As of September 30, 2001, there were no material changes to the information provided in GAFRI's Form 10-K for 2000 under the caption "Exposure to Market Risk" in Management's Discussion and Analysis of Financial Condition and Results of Operations.

Item 6

Exhibits and Reports on Form 8-K

(a)  Exhibits:  none

(b)  Reports on Form 8-K:  none

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 duly authorized.

|                  |  | GREAT AMERICAN FINANCIAL RESOURCES, Inc.
|----------------- |  | ----------------------------------------
|                  |  |                                         
|                  |  |                                         
|November 14, 2001 |  | BY:/s/Christopher P. Miliano            
|                  |  | Christopher P. Miliano                  
|                  |  | Chief Financial Officer                 

24