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                              Commission File
September 30, 1997                                          No. 1-11632



                        AMERICAN ANNUITY GROUP, INC.



Incorporated under                                          IRS Employer
I.D.
the Laws of Delaware                                        No. 06-1356481



               250 East Fifth Street, Cincinnati, Ohio  45202
                               (513) 333-5300
                                      





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, and (2) has been subject to such
filing requirements for the past 90 days.  Yes    X        No      



As of November 1, 1997, there were 43,214,083 shares of the Registrant's
Common Stock outstanding.


                                Page 1 of 20

                      AMERICAN ANNUITY GROUP, INC. 10-Q
                                   PART I
                            FINANCIAL INFORMATION

                AMERICAN ANNUITY GROUP, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEET
                            (Dollars in millions)
                                           September 30,December 31,
                                                   1997        1996 
Assets
  Investments:
    Fixed maturities:
      Held to maturity - at amortized cost 
       (market - $2,408.1 and $2,524.6)        $2,354.7    $2,495.7 
      Available for sale - at market
       (amortized cost - $3,708.4 and $3,254.9) 3,860.2     3,325.6 
    Equity securities - at market 
       (cost - $20.1 and $16.1)                    73.0        51.0 
    Investment in affiliates                       22.8        16.5 
    Mortgage loans on real estate                  63.8        68.1 
    Real estate                                    40.3        37.6 
    Policy loans                                  238.9       236.0 
    Short-term investments                          8.7        41.4 
      Total investments                         6,662.4     6,271.9 

  Cash                                             32.7        42.7 
  Accrued investment income                        99.3        94.8 
  Unamortized insurance acquisition costs, net    218.4       194.7 
  Other assets                                    168.4       172.4 
  Assets held in separate accounts                280.5       247.6 

                                               $7,461.7    $7,024.1 

Liabilities and Capital
   Annuity benefits accumulated                $5,505.8    $5,365.6 
  Life, accident and health reserves              600.1       575.4 
  Notes payable                                    85.0       114.9 
  Payable to affiliates, net                       26.1        14.5 
  Deferred taxes on unrealized gains               64.1        33.3 
  Accounts payable, accrued expenses and other
    liabilities                                   129.4       111.3 
  Liabilities related to separate accounts        280.5       247.6 
      Total liabilities                         6,691.0     6,462.6 
  
  Mandatorily redeemable preferred securities
    of subsidiary trusts                          225.0        75.0 

  Stockholders' Equity:
    Series B Preferred Stock (at redemption value)   -         49.0 
    Common Stock, $1 par value
      -100,000,000 shares authorized                    
      -43,213,201 and 43,255,705 shares
        outstanding                                43.2        43.3 
    Capital surplus                               359.0       358.5 
    Accumulated deficit at December 31, 1992     (212.6)     (212.6)
    Retained earnings since January 1, 1993       237.1       186.5 
    Unrealized gains on marketable securities,
      net                                         119.0        61.8 
        Total stockholders' equity                545.7       486.5 
 
                                               $7,461.7    $7,024.1 
                                      2
                      AMERICAN ANNUITY GROUP, INC. 10-Q

                AMERICAN ANNUITY GROUP, INC. AND SUBSIDIARIES
                        CONSOLIDATED INCOME STATEMENT
                   (In millions, except per share amounts)


                                        Three months ended Nine months ended
                                         September 30,         September 30,
                                             1997   1996       1997    1996 
Revenues:
  Net investment income                    $126.7 $119.4     $369.4  $347.0 
  Realized gains on sales of investments      1.5    0.5        1.7     1.4 
  Life, accident and health premiums         32.1   24.8       84.8    80.3 
  Equity in net earnings (loss) of
    affiliates                               (1.5)  (0.6)       1.8     2.2 
  Other income                                2.9    1.8        8.2     4.9 
                                            161.7  145.9      465.9   435.8    
Costs and Expenses:
  Annuity benefits                           72.9   69.5      212.3   206.3 
  Life, accident and health benefits         28.2   21.7       78.2    70.2 
  Amortization of insurance acquisition
    costs                                     7.6    6.9       23.8    21.1 
  Interest and other debt expenses            1.9    3.4        6.9    11.4 
  Trust preferred distribution requirement    4.7     -        10.7      -  
  Provision for relocation expenses           4.0     -         4.0      -  
  Other expenses                             18.7   18.9       54.2    53.3 
                                            138.0  120.4      390.1   362.3 

Income before income taxes
  and extraordinary item                     23.7   25.5       75.8    73.5 
Provision for income taxes                    7.3    8.4       23.7    25.4 
 
Income before extraordinary item             16.4   17.1       52.1    48.1 
                                                  
Extraordinary item - loss on
 prepayment of debt                          (1.5)  (1.7)      (1.5)    (6.0)

Net Income                                 $ 14.9 $ 15.4     $ 50.6  $ 42.1 
                                                  

  Preferred dividend requirement               -     0.4        1.0     1.1 

  Net income applicable to Common Stock    $ 14.9 $ 15.0     $ 49.6  $ 41.0 


  Average common shares outstanding          43.2   43.1       43.2    43.1 


Earnings per common share:
  Income before extraordinary item          $0.38  $0.39      $1.18   $1.09 
  Extraordinary item                        (0.03) (0.04)     (0.03)  (0.14)
  Net income                                $0.35  $0.35      $1.15   $0.95 
                                           3                                 
                      AMERICAN ANNUITY GROUP, INC. 10-Q

                AMERICAN ANNUITY GROUP, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                (In millions)

                                                 Nine months ended  
                                                   September 30,    
                                                   1997        1996 
Preferred Stock:
  Balance at beginning of period                 $ 49.0      $ 17.0 
  Retired during the period                       (49.0)         -  
    Balance at end of period                     $   -       $ 17.0 
 
Common Stock:
  Balance at beginning of period                 $ 43.3      $ 43.1 
  Retired during the period                        (0.1)         -  
    Balance at end of period                     $ 43.2      $ 43.1 
 

Capital Surplus:
  Balance at beginning of period                 $358.5      $361.1 
  Common Stock issuance                             0.2         0.1 
  Common Stock retired                             (0.7)         -  
  Preferred Stock retired                           2.0          -  
  Preferred dividends declared                     (1.0)       (0.7)
    Balance at end of period                     $359.0      $360.5 


Accumulated Deficit at December 31, 1992        ($212.6)    ($212.6)


Retained Earnings Since January 1, 1993:
  Balance at beginning of period                 $186.5      $131.4 
  Net income                                       50.6        42.1 
    Balance at end of period                     $237.1      $173.5 


Unrealized Gains, Net:
  Balance at beginning of period                 $ 61.8      $ 89.3 
  Change during period                             57.2       (57.8)
    Balance at end of period                     $119.0      $ 31.5 



                                      4
                      AMERICAN ANNUITY GROUP, INC. 10-Q

                AMERICAN ANNUITY GROUP, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENT OF CASH FLOWS
                                (In millions)

                                                 Nine months ended  
                                                    September 30,   
                                                   1997        1996 
Cash Flows from Operating Activities:
  Net income                                     $ 50.6      $ 42.1 
  Adjustments:
    Extraordinary losses on retirement of debt      1.5         6.0 
    Increase in life, accident and health reserves 24.7        22.8 
    Benefits to annuity policyholders             212.3       206.3 
    Amortization of insurance acquisition costs    23.8        21.1 
    Equity in net earnings of affiliates           (1.8)       (2.2)
    Depreciation and amortization                   3.8         3.9 
    Realized gains on investing activities         (1.7)       (1.4)
    Increase in insurance acquisition costs       (52.5)      (46.9)
    Increase in accrued investment income          (4.5)       (9.6)
    Increase in other assets                      (20.2)       (4.4)
    Increase (decrease) in other liabilities       16.0        (4.8)
    Other, net                                    (16.1)       (5.3)
                                                  235.9       227.6 

Cash Flows from Investing Activities:
  Purchases of and additional investments in:           
    Fixed maturity investments                 (1,037.3)     (759.4)
    Equity securities                              (7.6)         -  
    Real estate, mortgage loans and other assets   (8.6)      (21.7)
    Affiliates                                     (4.9)         -  
  Maturities and redemptions of fixed maturity
    investments                                   290.1       195.1 
  Sales of:
    Fixed maturity investments                    480.7       207.9 
    Equity securities                               5.3         1.2 
    Real estate, mortgage loans and other assets    7.9        21.1 
  Increase in policy loans                         (2.9)       (5.8)
                                                 (277.3)     (361.6)

Cash Flows from Financing Activities:
  Fixed annuity receipts                          369.7       410.2 
  Annuity surrenders, benefits and withdrawals   (439.8)     (372.0)
  Additions to notes payable                       63.0        82.2 
  Reductions of notes payable                     (94.7)      (98.1)
  Issuance of trust preferred securities          149.3          -  
  Issuance of Common Stock                           -          0.1 
  Retirement of Common Stock                       (0.8)         -  
  Retirement of Preferred Stock                   (47.0)         -  
  Cash dividends paid                              (1.0)       (0.7)
                                                   (1.3)       21.7 

Net decrease in cash and short-term investments   (42.7)     (112.3)

Cash and short-term investments at
  beginning of period                              84.1       169.4 
Cash and short-term investments at
  end of period                                 $  41.4      $ 57.1 
                                      5
                      AMERICAN ANNUITY GROUP, INC. 10-Q

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


A.  Description of the Company

    American Annuity Group, Inc. ("AAG" or "the Company") markets (i)
    individual and group annuities nationwide in savings and retirement
    markets, (ii) individual life insurance and annuity policies with the
    sponsorship of state associations of funeral directors as well as
    individual and large operators of funeral homes across the country and
    (iii) various forms of supplemental life and health insurance through
    payroll deduction plans and financial institutions.

    American Financial Group, Inc. ("AFG") and its subsidiaries owned
    35,059,995 shares (81%) of AAG's Common Stock at November 1, 1997.

B.  Accounting Policies

    Basis of Presentation  The accompanying consolidated financial
    statements for AAG and its subsidiaries are unaudited, but 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.  

    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  Debt securities are classified as "held to maturity" and
    reported at amortized cost if AAG has the positive intent and ability to
    hold them to maturity.  Debt and equity securities are classified as
    "available for sale" and reported at fair value with unrealized gains
    and losses reported as a separate component of stockholders' equity if
    the securities are not classified as held to maturity or bought and held
    principally for selling in the near term.  Only in certain limited
    circumstances, such as significant issuer credit deterioration or if
    required by insurance or other regulators, may a company change its
    intent to hold a certain security to maturity without calling into
    question its intent to hold other debt securities to maturity in the
    future.

    Short-term investments are carried at cost; mortgage loans on real
    estate are generally carried at amortized cost; policy loans are stated
    at the aggregate unpaid balance.

    Gains or losses on sales of securities are recognized at the time of 
    disposition with the amount of gain or loss 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.  Premiums and discounts on mortgage-backed
    securities are amortized over their expected average lives using the
    interest method.
 
                                      6
                      AMERICAN ANNUITY GROUP, INC. 10-Q

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


    Investment in Affiliates  AAG's investments in equity securities of
    companies that are 20% to 50% owned by AFG and its subsidiaries are
    carried at cost, adjusted for a proportionate share of their
    undistributed earnings or losses.  

    Insurance Acquisition Costs  Unamortized insurance acquisition costs
    consist primarily of deferred policy acquisition costs and the present
    value of future profits on business in force of acquired insurance
    companies.  Certain commission costs are expensed as paid and are
    included in amortization of life insurance acquisition costs.

    Deferred Policy Acquisition Costs ("DPAC")  DPAC (principally
    commissions, advertising, underwriting, policy issuance and sales
    expenses that vary with and are primarily related to the production of
    new business) is deferred to the extent that such costs are deemed
    recoverable.

    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.

    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.

    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 classified
    as "available for sale" 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.

    Present Value of Future Profits  Included in insurance acquisition costs
    are amounts representing the present value of future profits on business
    in force of acquired insurance companies, which represent the portion of
    the costs to acquire such companies that is allocated to the value of
    the right to receive future cash flows from insurance contracts existing
    at the date of acquisition.

    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
                      AMERICAN ANNUITY GROUP, INC. 10-Q

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


    Annuity Benefits Accumulated  Annuity receipts and benefit payments are
    recorded as increases or decreases in "annuity benefits accumulated"
    rather than as revenue and expense.  Increases in this liability for
    interest credited are charged to expense and decreases for surrender
    charges are credited to other income.

    Life, Accident and Health Benefit Reserves  Liabilities for future
    policy benefits under traditional ordinary life, accident and health
    policies are computed using the net level premium method.  Computations
    are based on anticipated investment yields, mortality, morbidity and
    surrenders and include provisions for unfavorable deviations.  Reserves
    are modified as necessary to reflect actual experience and developing
    trends.  

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

    Assets Held In and Liabilities Related To Separate Accounts  Investment
    annuity deposits and related liabilities primarily represent deposits
    maintained by several banks under a previously offered tax-deferred
    annuity program.  The Company receives an annual fee from each bank for
    sponsoring the program; if depositors elect to purchase an annuity from
    the Company, funds are transferred to the Company.

    Life, Accident and Health Premiums and Benefits  For traditional life,
    accident and health products, premiums are recognized as revenue when
    legally collectible from policyholders.  Policy reserves have been
    established in a manner which allocates policy benefits and expenses on
    a basis consistent with the recognition of related premiums and
    generally results in the recognition of profits over the premium-paying
    period of the policies.

    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  AAG, Great American Life Insurance Company ("GALIC") and
    all other material 80%-owned U.S. non-life subsidiaries are consolidated
    for federal income tax purposes with American Financial Corporation
    ("AFC"), the common stock of which is owned by AFG.  AAG's other life
    insurance subsidiaries will likely be required to file separate federal
    income tax returns through the sixth year from their acquisition or
    formation.

    AAG and GALIC have separate tax allocation agreements with AFC which
    designate how tax payments are shared by members of the tax group.  In
    general, both companies compute taxes on a separate return basis.  GALIC
    is obligated to make payments to (or receive benefits from) AFC based on
    taxable income without regard to temporary differences.  In accordance
    with terms of AAG's indentures, AAG receives GALIC's tax allocation
    payments for the benefit of AAG's deductions arising from current
    operations.  If GALIC's taxable income (computed on a statutory
    accounting basis) exceeds a current period net operating loss of AAG,
    the taxes payable by GALIC associated with the excess are payable to
    AFC.  If the AFC tax group utilizes any of AAG's net operating losses or
    deductions that originated prior to AAG's entering AFC's consolidated
    tax group, AFC will pay to AAG an amount equal to the benefit received.

                                      8
                      AMERICAN ANNUITY GROUP, INC. 10-Q

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


    Deferred income tax assets and liabilities are determined based on
    differences between financial reporting and tax bases 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.

    Stock-Based Compensation  As permitted under Statement of Financial
    Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
    Compensation", AAG accounts for stock options and other stock-based
    compensation plans using the intrinsic value based method prescribed
    by Accounting Principles Board Opinion No. 25, "Accounting for Stock
    Issued to Employees."

    Earnings Per Share  Earnings per share are calculated on the basis of
    the weighted average number of shares of common stock outstanding
    during the period.  The effect of assumed exercise of common stock
    options in 1997 was not deemed dilutive and is therefore not
    reflected in the earnings per share presentation for that period. 
    AAG had no stock options outstanding prior to the fourth quarter of
    1996.

    New accounting standards issued in 1997 revise current rules for
    computing and presenting earnings per share beginning with financial
    statements issued for periods ending after December 15, 1997.  The
    new rules require the presentation of basic and diluted earnings per
    share for entities with potentially dilutive securities. 
    Implementation of these new rules will not materially affect AAG's
    reported earnings per share amounts.
                                                        
    Benefit Plans  AAG sponsors an Employee Stock Ownership Retirement Plan
    ("ESORP") covering all employees who are qualified as to age and length
    of service.  The ESORP, which invests primarily in securities of AAG, is
    a trusteed, noncontributory plan for the benefit of the employees of AAG
    and its subsidiaries.  Contributions are discretionary by the directors
    of AAG and are charged against earnings in the year for which they are
    declared.  Qualified employees having vested rights in the plan are
    entitled to benefit payments at age 60.

    AAG 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.

    Statement of Cash Flows  For cash flow purposes, "investing activities"
    are defined as making and collecting loans and acquiring and disposing
    of debt or equity instruments and property and equipment.  "Financing
    activities" include annuity receipts, benefits and withdrawals and
    obtaining resources from owners and providing them with a return on
    their investments.  All other activities are considered "operating." 
    Short-term investments having original maturities of three months or
    less when purchased are considered to be cash equivalents for purposes
    of the financial statements.
    
                                      9
                      AMERICAN ANNUITY GROUP, INC. 10-Q

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

C.  1997 Acquisition

    In September 1997, AAG entered into an agreement to acquire General
    Accident Life Assurance Company of Puerto Rico, Inc. which had total
    assets of approximately $190 million at June 30, 1997.  AAG will pay
    approximately $50 million for General Accident and expects to fund the
    acquisition with amounts borrowed under its bank lines of credit.  The
    acquisition is expected to be completed in the fourth quarter of 1997. 

D.  Investments

    The carrying value of AAG's fixed maturity portfolio was comprised of
    the following at September 30, 1997:
                                        Held to Available 
                                        Maturity for Sale  Total  
      U. S. Government and government
        agencies and authorities            1%       3%       4%  
      Public utilities                      6        3        9   
      Mortgage-backed securities           11       22       33   
      All other corporate                  20       34       54   
                                           38%      62%     100%  

    "Investing activities" related to fixed maturity investments in AAG's
    Statement of Cash Flows for the nine months ending September 30,
    consisted of the following (in millions):
                                        Held to Available 
                                        Maturity for Sale  Total  
      1997
      Purchases                              - ($1,037.3)($1,037.3)
      Maturities and paydowns            $140.0    150.1    290.1 
      Sales                                  -     480.7    480.7 

      1996
      Purchases                         ($103.9) ($655.5) ($759.4)
      Maturities and paydowns              81.3    113.8    195.1 
      Sales                                 9.3    198.6    207.9 

    Securities classified as "held to maturity" having an amortized cost
    of $9.5 million were sold in the first nine months of 1996 due to
    significant deterioration of the issuers' creditworthiness.
                                     10
                      AMERICAN ANNUITY GROUP, INC. 10-Q

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

E.  Investment in Affiliates

    Investment in affiliates reflects primarily AAG's 5% ownership (2.7
    million shares; carrying value of $17.9 million at September 30, 1997)
    of the common stock of Chiquita Brands International which is accounted
    for under the equity method.  AFG and its other subsidiaries own an
    additional 35% interest in the common stock of Chiquita.  Chiquita is a
    leading international marketer, producer and distributor of bananas and
    other quality fresh and processed food products.  The market value of
    AAG's investment in Chiquita was $43.1 million at September 30, 1997 and
    $34.1 million at December 31, 1996.    

F.  Unamortized Insurance Acquisition Costs

    Unamortized insurance acquisition costs consisted of the following (in
    millions):
                                          September 30,  December 31,
                                                  1997          1996 
        Deferred policy acquisition costs       $296.4        $272.2 
        Present value of future profits acquired  67.1          72.5 
        Unearned revenues                       (145.1)       (150.0)
                                                $218.4        $194.7 
G.  Notes Payable

    Notes payable consisted of the following (in millions):

                                          September 30,  December 31,
                                                  1997          1996 
        
        Direct obligations of AAG                $ 1.3        $  1.3 
        Obligations of AAG Holding:                                  
          Bank Credit Line due September 1999     40.0          44.7 
          Unsecured Bank Credit Line due
           September 1998                         16.0            -  
          9-1/2% Senior Notes due August 2001       -           40.8 
          11-1/8% Senior Subordinated Notes
            due February 2003                     24.1          24.1     
         Other subsidiary debt                     3.6           4.0 
             Total                               $85.0        $114.9 

    In connection with the anticipated establishment of a new unsecured
    line of credit, the Company transferred all the outstanding stock of
    GALIC to AAG Holding Company, Inc., a wholly-owned subsidiary of the
    Company, in November 1996.  In connection with that transaction, AAG
    Holding assumed all of the Company's obligations under the 9-1/2%
    Senior Notes, 11-1/8% Senior Subordinated Notes and the bank lines of
    credit.  The Company has guaranteed the obligations of AAG Holding
    under this indebtedness.

    AAG Holding has a $75 million revolving credit agreement with four
    banks.  Loans under the credit agreement mature in 1999 and bear
    interest at floating rates based on prime or Eurodollar rates and are
    collateralized by 25% of the common stock of GALIC.  At September 30,
    1997 and December 31, 1996, the weighted average interest rate on
    amounts borrowed under the bank credit line was 6.66% and 6.68%,
    respectively.  AAG Holding also has a $40 million unsecured bank line of
    credit with terms similar to the $75 million credit agreement.    

    

                                     11
                      AMERICAN ANNUITY GROUP, INC. 10-Q

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

    On August 15, 1997, AAG Holding retired its 9-1/2% Senior Notes
    realizing a pretax extraordinary loss of $2.4 million.

    In the first three quarters of 1996, the Company repurchased $77.9
    million principal amount of its Notes (including $21.3 million purchased
    by GALIC) realizing a pretax extraordinary loss of approximately $8.2
    million.
 
    At September 30, 1997, scheduled principal payments on debt for the last
    three months of 1997 and the subsequent five years are shown below (in
    millions).  The scheduled principal payments assume that 11-1/8% Notes
    previously purchased are applied to the earliest scheduled retirements.

          1997        1998        1999        2000        2001        2002 
          $0.2       $16.7       $40.8        $0.8        $0.6        $0.5   

    
H.  Mandatorily Redeemable Preferred Securities of Subsidiary Trusts

    In November 1996, a wholly-owned subsidiary trust of AAG Holding
    issued three million units of 9-1/4% Trust Originated Preferred
    Securities ("TOPrS") for $75 million in cash.  The Trust then
    purchased $75 million of newly issued AAG Holding 9-1/4% Subordinated
    Debentures due 2026, which, along with related interest and principal
    payments received, are the only assets of the Trust.

    The TOPrS are mandatorily redeemable upon maturity or redemption of
    the Subordinated Debentures.  The Subordinated Debentures are
    redeemable by AAG Holding on or after November 7, 2001.  
    
    In private offerings in March 1997 and May 1997, wholly-owned
    subsidiary trusts of AAG Holding issued $75 million of 8-7/8% trust
    preferred securities and $75 million of 7-1/4% Remarketed Par
    Securities ("ROPES"), respectively, and used the proceeds to purchase
    related debentures of AAG Holding which are scheduled to mature in
    2027 and 2041, respectively.  The 8-7/8% preferred securities and
    related debentures are redeemable on or after March 1, 2007; the 7-
    1/4% ROPES and related debentures are redeemable prior to September
    28, 2000 and after September 28, 2001.
    
    AAG and AAG Holding effectively provide an unconditional guarantee of
    the trusts' obligations. 

I.  Stockholders' Equity

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

    On March 27, 1997, AAG retired all of its outstanding Series B Preferred
    Stock for approximately $47 million.

    At September 30, 1997, there were 2.5 million shares of AAG Common Stock
    reserved for issuance upon exercise of stock options.  As of that date,
    AAG had options for 1.7 million shares outstanding.  The options vest at
    a rate of 20% per year and expire ten years from the date of grant.

    "Retained earnings since January 1, 1993" reflects AAG's results
    since the acquisition of GALIC.

                                     12
                      AMERICAN ANNUITY GROUP, INC. 10-Q

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

J.  Contingencies

    The Company is continuing its clean-up activities at certain of its
    former manufacturing operations and third-party sites, in some cases in
    accordance with consent agreements with federal and state environmental
    agencies.  Changes in regulatory standards and further investigations
    could affect estimated costs in the future.  Management believes that
    reserves recorded are sufficient to satisfy the known liabilities and
    that the ultimate cost will not, individually, or in the aggregate, have
    a material adverse effect on the financial condition or results of
    operations of AAG.

    In 1991, the Company identified possible deficiencies in procedures
    for reporting quality assurance information to the Defense
    Electronics Supply Center with respect to the Company's former
    manufacturing operations.  Over the last several years, the Company
    has been engaged in negotiations with the United States Government
    with respect to the settlement of claims the Government might have
    arising out of the reporting deficiencies.  In September 1997, the
    Government agreed to resolve these claims in exchange for a payment
    of $3.5 million.  The Company's previously established liability for
    these claims was sufficient to cover this settlement.

K.  Additional Information

    Statutory Information of Great American Life Insurance Company 
    Insurance companies are required to file financial statements with
    state insurance regulatory authorities prepared on an accounting
    basis prescribed or permitted by such authorities (statutory basis). 
    Certain statutory amounts for GALIC, AAG's primary insurance
    subsidiary, were as follows (in millions):         
     
                                      September 30,December 31,
                                              1997        1996 
             Policyholders' surplus         $329.6      $285.0 
             Asset valuation reserve          63.6        91.4 
             Interest maintenance reserve     20.4        24.7 

                                Nine months ended September 30,
                                              1997        1996 
             Net income from operations     $ 51.7      $ 50.1 
             Net income                       53.8        48.0 

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, 1996, GALIC may pay $66.2 million in dividends in 1997 without
prior approval.  In the first nine months of 1997, AAG received $45.0
million in capital distributions from GALIC.
                                     13
                      AMERICAN ANNUITY GROUP, INC. 10-Q

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


Summary Financial Information of AAG Holding   AAG has guaranteed all of the
outstanding debt of AAG Holding.  Summarized consolidated financial
information for AAG Holding is as follows (in millions):


                                                September 30,  December 31,
                                                       1997         1996 
              Balance Sheet                                          
              Investments                             $6,576      $6,272
              Unamortized insurance acquisition costs    218         195
              Assets held in separate accounts           280         247 
              Other assets                               269         278 

              Insurance reserves                      $6,108      $5,942
              AAG Holding Company notes payable:
                Due parent                               165         166
                Due others                                80         110
              Liabilities related to separate accounts   280         247 
              Other liabilities                          159          96

              Mandatorily redeemable preferred securities               
                of subsidiary trusts                  $  225      $   75

              Stockholder's equity                    $  326      $  356   


                                                     Nine months ended  
                                                       September 30,    
                                                        1997        1996
              Income Statement                                          
              Revenues                                $  456          *  
              Pretax income                               68          *
              Net income                                  43          *

              

              * AAG Holding was formed on November 1, 1996.

              
                                     14
                      AMERICAN ANNUITY GROUP, INC. 10-Q

                    Management's Discussion and Analysis
              of Financial Condition and Results of Operations


GENERAL

American Annuity Group, Inc. ("AAG" 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, satisfaction of liabilities in connection with
discontinued operations, the payment of interest and principal on borrowings
and shareholder dividends.

LIQUIDITY AND CAPITAL RESOURCES  

Ratios  The following ratios may be considered relevant indicators of AAG's
liquidity and are typically presented by AAG in its prospectuses and similar
documents.


                                             Nine months ended            
                                               September 30,  
                                               1997  1996
                                                               
          Earnings to fixed charges             5.1   6.9
                                                          
          Earnings to fixed charges plus
            preferred dividends                 4.7   6.1
                                                         
                                                         
                                      September 30,   December 31,
                                               1997  1996     1995
          Consolidated debt to capital,
            excluding unrealized gains          22%   19%     33%
                                                         
          Consolidated debt to capital,            
            including unrealized gains          19%   17%     28%

For purposes of the calculations of consolidated debt to capital,
consolidated debt includes the Company's notes payable and $75 million of
ROPES which were issued in May 1997.  Capital represents the sum of notes
payable, redeemable preferred securities of subsidiary trusts, preferred
stock and common equity.
                                                         
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, 1997, the capital ratios of
each of AAG's insurance subsidiaries exceeded the RBC requirements (the
lowest capital ratio of any AAG subsidiary was 4.4 times its authorized
control level RBC). 
                                     15
                      AMERICAN ANNUITY GROUP, INC. 10-Q

                    Management's Discussion and Analysis
        of Financial Condition and Results of Operations - Continued

Sources and Uses of Funds  The ability to pay interest and principal on
debt, dividends on preferred securities, obligations related to discontinued
manufacturing operations and other holding company costs is largely
dependent upon payments from Great American Life Insurance Company ("GALIC")
in the form of capital distributions.  The amount of capital distributions
which can be paid by GALIC is subject to restrictions relating to statutory
surplus and earnings.  The maximum amount of dividends payable by GALIC in
1997 without prior regulatory approval is $66 million.  In the first nine
months of 1997, GALIC made $45 million in such payments.

In 1995 and 1996, AAG issued shares of its Series B Preferred Stock to its
affiliates for $49 million in cash.  In 1996 and 1997, subsidiary trusts
sold preferred securities for cash proceeds of $225 million.  Approximately
half of the aggregate proceeds was used to retire debt and the Series B
preferred; another 14% was contributed to GALIC as capital; the remainder is
being used for general corporate purposes.

On August 15, 1997, AAG Holding redeemed all of its outstanding 9-1/2%
Senior Notes for approximately $42.5 million.  AAG Holding financed the
redemption with funds borrowed under its bank credit lines.  
                                                   
At September 30, 1997, AAG Holding had $59 million available under its bank
lines of credit.  AAG Holding expects to expand and extend its credit lines
in the near future.

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

Investments  Insurance laws restrict the types and amounts of investments
which are permissible for life insurers.  These restrictions are designed to
ensure the safety and liquidity of insurers' investment portfolios.  The
NAIC has developed a model investment law which management believes will not
have a material impact on AAG.

The NAIC assigns quality ratings to publicly traded as well as privately
placed securities.  These ratings range from Class 1 (highest quality) to
Class 6 (lowest quality).  The following table shows the Company's fixed
maturity portfolio by NAIC designation (and comparable Standard & Poor's
Corporation rating) as of September 30, 1997:

      NAIC                                       % of Total 
      Rating   Comparable S&P Rating            Market Value
         1     AAA, AA, A                              66%  
         2     BBB                                     27   
                    Total investment grade             93   
         3     BB                                       4   
         4     B                                        3   
         5     CCC, CC, C                               *   
         6     D                                        -   
                    Total non-investment grade          7   
                    Total fixed maturities            100%  
                      
      * less than 1%
                                     16
                      AMERICAN ANNUITY GROUP, INC. 10-Q

                    Management's Discussion and Analysis
        of Financial Condition and Results of Operations - Continued


Management believes that the high credit quality of AAG's investment
portfolio should generate a stable and predictable investment return.

AAG invests primarily in fixed income investments which, including loans and
short-term investments, comprised 98% of its investment portfolio at
September 30, 1997.  AAG generally invests in securities with intermediate-
term maturities with an objective of optimizing interest yields while
maintaining an appropriate relationship of maturities between AAG's assets
and expected liabilities.

At September 30, 1997, less than 2% of AAG's total assets were invested in
mortgage loans and real estate, the majority of which had been purchased
within the last four years.

At September 30, 1997, AAG's mortgage-backed securities ("MBSs") portfolio
represented approximately one-third of its fixed maturity investments. 
Interest only (I/O), principal only (P/O) and other "high risk" MBSs
represented less than one percent of total assets.  AAG invests primarily in
MBSs which have a reduced risk of prepayment.  In addition, the majority of
MBSs held by AAG were purchased at a discount.  Management believes that the
structure and discounted nature of the MBSs will minimize the effect of
prepayments on earnings over the anticipated life of the MBS portfolio.

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

Contingencies  A managing general agency which produced approximately one-
fifth of GALIC's premiums in 1996 and less than one-seventh of its premiums
in the first nine months of 1997 was named a defendant in a lawsuit filed in
July 1996 by two regulatory agencies in California.  The managing general
agency has settled the allegations brought against it by agreeing, among
other things, to modify certain sales practices.  The regulatory agencies
have taken a position that GALIC may be responsible for certain acts of its
insurance agents in connection with the sale of GALIC's annuities.  GALIC is
engaged in discussions with the regulatory agencies to resolve this matter. 
The ultimate outcome is not expected to have a material adverse impact on
the financial condition of the Company.


  
                                     17
                      AMERICAN ANNUITY GROUP, INC. 10-Q

                    Management's Discussion and Analysis
        of Financial Condition and Results of Operations - Continued

RESULTS OF OPERATIONS

General   GALIC's principal products are Flexible Premium Deferred Annuities
("FPDAs") and Single Premium Deferred Annuities ("SPDAs").  The following
table summarizes AAG's premiums (in millions):

                          Three months ended  Nine months ended
                             September 30,           September 30,  
                               1997    1996       1997    1996
   Annuities:
     FPDAs - first year        $  6    $  7       $ 24    $ 26 
     FPDAs - renewal             30      33        119     134 
     SPDAs                       63      81        190     223 
     Pre-need annuities           8      10         30      29     
     Variable annuities          12       -         28       - 
                                119     131        391     412 

   Life, Accident and Health:
     Life insurance               6       6         17      17 
     Pre-need life insurance     20      13         49      45 
     Accident and health
      insurance                   5       5         16      16 
                                 31      24         82      78          
                               $150    $155       $473    $490 

SPDA sales in 1997 reflect the decrease of business written by GALIC's
largest premium producing agency in 1996.  GALIC is no longer writing
business with this agency (see "Management's Discussion and Analysis -
Contingencies").

Pretax Operating Earnings  Pretax earnings from operations (before realized
gains, equity in net earnings (loss) of affiliates and provision for
relocation expenses) for the third quarter and first nine months of 1997
were $27.7 million and $76.3 million, respectively, compared to $25.6
million and $69.9 million for the same periods in 1996.  The improvement in
1997 reflects the growth in invested assets as well as a decrease in the
effective average crediting rate on annuity policies.

Net Investment Income  Net investment income increased 6% in both the third
quarter and first nine months of 1997 compared to the same periods in 1996
due to an increase in the Company's average fixed maturity investment base. 
Investment income is reflected net of investment expenses of $2.6 million in
1997 and $4.9 million in 1996.

Realized Gains  Individual securities are sold from time to time as market
opportunities appear to present optimal situations under AAG's investment
strategies.

Equity in Net Earnings (Loss) of Affiliates  Equity in net earnings (loss)
of affiliates represents primarily AAG's proportionate share of the results
of Chiquita Brands International.  Chiquita reported a net loss before
extraordinary item for the third quarter of 1997 and 1996 of $28.0 million
and $7.6 million respectively.  Net income before extraordinary item for the
first nine months of 1997 and 1996 was $56.4 million and $59.7 million,
respectively.  

                                     18
                      AMERICAN ANNUITY GROUP, INC. 10-Q

                    Management's Discussion and Analysis
        of Financial Condition and Results of Operations - Continued

Other Income   Other income increased $1.1 million and $3.3 million in the
third quarter and first nine months of 1997 compared to the same periods in
1996 due primarily to increased revenues from certain non-insurance
subsidiaries and additional annuity fees. 

Annuity Benefits  Annuity benefits reflect interest credited to annuity
policyholders' funds accumulated.  The majority of GALIC's fixed rate
annuity products permit GALIC to change the crediting rate at any time
(subject to minimum interest rate guarantees of 3% or 4% per annum).  As a
result, management has been able to react to changes in market interest
rates and maintain a desired interest rate spread without a substantial
effect on persistency.  Annuity benefits increased 5% in the third quarter
and 3% in the first nine months of 1997 compared to the same periods in 1996
due primarily to an increase in average annuity benefits accumulated.
  
Amortization of Insurance Acquisition Costs  Amortization of insurance
acquisition costs increased 10% in the third quarter and 13% in the first
nine months of 1997 compared to the same periods in 1996 due primarily to
higher average DPAC balances.

Interest and Other Debt Expenses  Interest expense on borrowings decreased
44% in the third quarter and 39% in the first nine months of 1997 compared
to the same periods in 1996 due primarily to the retirement of debt during
1996 and 1997.
   
Trust Preferred Distribution Requirement  Trust preferred distribution
requirement represents amounts accrued on $225 million of preferred
securities issued by subsidiaries of AAG in 1996 and 1997.

Provision for Relocation Expenses  In the third quarter of 1997, AAG began
relocating most of the operations of Loyal American Life Insurance Company
from Mobile, Alabama to Cincinnati, Ohio.  The estimated cost of the
relocation ($4.0 million) was expensed in the third quarter of 1997.  The
relocation should be substantially completed during 1997.  

Income Taxes  AAG's effective tax rate decreased in 1997 due to a reduction
of the valuation allowance associated with certain deferred tax assets.

NEW TAX LEGISLATION

New federal tax legislation was signed into law in August 1997.  Management
believes the legislation will not have a material affect on AAG's financial
condition or results of operations.

                                    19  
                      AMERICAN ANNUITY GROUP, INC. 10-Q
                                   PART II
                              OTHER INFORMATION


                                   ITEM 1

                              Legal Proceedings

In September 1997, the Company paid $3.5 million to settle claims with
respect to the Company's former manufacturing operations.  (See Note J to
consolidated financial statements).



                                   ITEM 6

                      Exhibits and Reports on Form 8-K

(a)   Exhibit 27 - Financial Data Schedule as of September 30, 1997.  For
submission        in electronic filing only.

(b)   Report 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.

                                   American Annuity Group, Inc.



November 13, 1997                  BY:/s/William J. Maney             
                                      William J. Maney
                                      Senior Vice President, Treasurer
                                        and Chief Financial Officer
                                     20