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
   March 31, 1998                                              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 May 1, 1998, there were 43,123,033 shares of the Registrant's Common
   Stock outstanding.



                                   Page 1 of 19


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

                  AMERICAN ANNUITY GROUP, INC. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEET



                              (Dollars in millions)
                                                  March 31,   December 31,
                                                      1998           1997 
   Assets
     Investments:
       Fixed maturities:
         Held to maturity - at amortized cost 
          (market - $2,246.2 and $2,340.6)        $2,184.4   $2,276.4 
         Available for sale - at market
          (amortized cost - $4,134.9 and $3,922.0) 4,311.9    4,099.4 
       Equity securities - at market 
          (cost - $35.3 and $30.9)                    91.7       83.0 
       Investment in affiliate                        19.1       16.8 
       Mortgage loans on real estate                  49.6       52.1 
       Real estate                                    43.4       42.0 
       Policy loans                                  240.3      241.0 
       Short-term investments                         32.3       13.9 
         Total investments                         6,972.7    6,824.6 
    
     Cash                                             32.7       36.8 
     Accrued investment income                       102.6      101.6 
     Unamortized insurance acquisition costs, net    272.1      261.6 
     Other assets                                    194.8      185.2 
     Assets held in separate accounts                315.9      300.5 

                                                  $7,890.8   $7,710.3 

   Liabilities and Capital
      Annuity benefits accumulated                $5,540.3   $5,528.1 
     Life, accident and health reserves              778.0      709.9 
     Notes payable                                   161.6      135.8 
     Payable to affiliates, net                       43.7       35.8 
     Deferred taxes on unrealized gains               73.2       71.8 
     Accounts payable, accrued expenses and other
       liabilities                                   143.4      119.5 
     Liabilities related to separate accounts        315.9      300.5 
         Total liabilities                         7,056.1    6,901.4 
    
     Mandatorily redeemable preferred securities
       of subsidiary trusts                          225.0      225.0 

     Stockholders' Equity:
       Common Stock, $1 par value
         -100,000,000 shares authorized
         - 43,122,157 and 43,199,147 shares
           outstanding                                43.1       43.2 
       Capital surplus                               366.3      368.0 
       Accumulated deficit at December 31, 1992     (212.6)    (212.6)
       Retained earnings since January 1, 1993       277.0      252.1 
       Unrealized gains on marketable securities,
        net                                          135.9      133.2 
         Total stockholders' equity                  609.7      583.9 
    
                                                  $7,890.8   $7,710.3 
                                        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      
                                                          March 31,        
                                                      1998       1997   
   Revenues:
     Net investment income                          $127.0     $119.6   
     Realized gains on sales of investments           10.2        0.3   
     Life, accident and health premiums               46.8       25.4   
     Equity in net earnings of affiliate               2.4        1.8   
     Other income                                      3.2        2.6    
                                                     189.6      149.7    
   Costs and Expenses: 
     Annuity benefits                                 71.1       68.8  
     Life, accident and health benefits               38.1       24.2  
     Amortization of insurance acquisition costs      14.0        7.7    
     Trust preferred distribution requirement          4.8        2.1  
     Interest and other debt expenses                  2.5        2.6   
     Other expenses                                   21.0       18.1     
                                                     151.5      123.5      
   Income before income taxes and extraordinary
       item                                           38.1       26.2   
   Provision for income taxes                         12.4        8.2        
   Income before extraordinary item                   25.7       18.0        
   Extraordinary item - loss on prepayment of debt    (0.8)        -      

   Net Income                                       $ 24.9     $ 18.0    
                                                    
     Preferred dividend requirement                     -         1.0  
                                                    
     Net income applicable to Common Stock          $ 24.9     $ 17.0   
     Average number of common shares:                                  
         Basic                                        43.1       43.2  
         Diluted                                      43.8       43.4  

   Basic earnings (loss) per common share:
     Before extraordinary item                       $0.60      $0.39   
     Loss on prepayment of debt                      (0.02)        -       
     Net income                                      $0.58      $0.39   

   Diluted earnings (loss) per common share: 
     Before extraordinary item                       $0.59      $0.39  
     Loss on prepayment of debt                      (0.02)        -   
     Net income                                      $0.57      $0.39  
                                        3

                        AMERICAN ANNUITY GROUP, INC. 10-Q

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

                                                     Three months ended 
                                                           March 31,      
                                                      1998       1997 
   Preferred Stock:
     Balance at beginning of period                 $   -      $ 49.0 
     Preferred Stock retired                            -       (49.0)
       Balance at end of period                     $   -      $   -  
    
   Common Stock:
     Balance at beginning of period                 $ 43.2     $ 43.3 
     Common Stock retired                             (0.1)      (0.1)
       Balance at end of period                     $ 43.1     $ 43.2 
    



   Capital Surplus:
     Balance at beginning of period                 $368.0     $358.5 
     Common Stock retired                             (1.7)      (0.7)
     Preferred Stock retired                            -         2.0 
     Preferred dividends declared                       -        (1.0)
       Balance at end of period                     $366.3     $358.8 


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


   Retained Earnings Since January 1, 1993:
     Balance at beginning of period                 $252.1     $186.5 
     Net income                                       24.9       18.0 
       Balance at end of period                     $277.0     $204.5 


   Unrealized Gains, Net:
     Balance at beginning of period                 $133.2     $ 61.8 
     Change during period                              2.7      (39.3)
       Balance at end of period                     $135.9     $ 22.5 





   Comprehensive Income (Loss):
     Net income                                     $ 24.9     $ 18.0 
     Other comprehensive income - change in net
       unrealized gains on marketable securities       2.7      (39.3)  
       Comprehensive income (loss)                  $ 27.6    ($ 21.3)
                                        4

                        AMERICAN ANNUITY GROUP, INC. 10-Q

                  AMERICAN ANNUITY GROUP, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (In millions)
                                                    Three months ended 
                                                         March 31,      
                                                      1998       1997 
   Cash Flows from Operating Activities:
     Net income                                     $ 24.9     $ 18.0 
     Adjustments:
       Extraordinary loss on prepayment of debt        0.8         -  
       Increase in life, accident and health reserves 16.2        6.1 
       Benefits to annuity policyholders              71.1       68.8 
       Amortization of insurance acquisition costs    14.0        7.7 
       Equity in net earnings of affiliate            (2.4)      (1.8)
       Depreciation and amortization                   1.9        1.1 
       Realized gains on investing activities        (10.2)      (0.3)
       Increase in insurance acquisition costs       (24.3)     (17.3)
       Increase in accrued investment income          (1.0)      (3.1)
       Increase in other assets                       (5.8)     (10.2)
       Increase (decrease) in other liabilities       (2.3)      14.8 
       Other, net                                     (1.2)      (2.0)
                                                      81.7       81.8 

   Cash Flows from Investing Activities:
     Purchases of and additional investments in:
       Fixed maturity investments                   (285.7)    (381.2)
       Equity securities                              (4.4)      (7.1)



       Real estate, mortgage loans and other assets   (4.7)      (2.9)
     Purchase of subsidiaries, net of cash acquired   (9.3)        -  
     Maturities and redemptions of fixed maturity
       investments                                   157.4       79.7 
     Sales of:
       Fixed maturity investments                     97.7      172.9 
       Equity securities                               2.0        3.6 
       Real estate, mortgage loans and other assets   12.5        2.4 
     Decrease in policy loans                          0.6        1.0 
                                                     (33.9)    (131.6)

   Cash Flows from Financing Activities:
     Fixed annuity receipts                          107.8      133.4 
     Annuity surrenders, benefits and withdrawals   (164.0)    (134.7)
     Additions to notes payable                       50.0        7.0 
     Reductions of notes payable                     (25.5)      (0.1)
     Issuance of trust preferred securities             -        74.7 
     Retirement of Common Stock                       (1.8)      (0.8)
     Retirement of Preferred Stock                      -       (47.0)
     Cash dividends paid                                -        (1.0)
                                                     (33.5)      31.5 

   Net decrease in cash and short-term investments    14.3      (18.3)

   Cash and short-term investments at beginning
      of period                                       50.7       84.1 
   Cash and short-term investments at end of period $ 65.0     $ 65.8 

                                        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 the following
   nationwide:  (i) retirement products - primarily fixed and variable
   annuities;  (ii) individual life insurance and annuity policies through the
   sponsorship of state associations of funeral directors as well as individual
   and large operators of funeral homes and (iii) various forms of life and
   supplemental health insurance through payroll deduction plans, financial
   institutions and in-home sales.

   American Financial Group, Inc. ("AFG") and its subsidiaries owned 35,059,995
   shares (81%) of AAG's Common Stock at May 1, 1998.

   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.

   AAG's acquisition of Great American Life Assurance Company of Puerto Rico,
   Inc. ("GA Life", formerly General Accident Life Assurance Company of Puerto
   Rico, Inc.) in December 1997 was recorded as a purchase.  The results of GA
   Life's operations have been included in AAG's Consolidated Financial
   Statements since its acquisition. 

   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.


                                        6

                        AMERICAN ANNUITY GROUP, INC. 10-Q

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


   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.

   Investment in Affiliate  AAG's investments in equity securities of companies
   that are 20% to 50% owned by AFG and its subsidiaries are generally carried
   at cost, adjusted for a proportionate share of their undistributed earnings
   or losses.  Changes in AAG's equity in its affiliate caused by issuances of
   the affiliate's stock are recognized in earnings when such issuances are not
   part of a broader reorganization.  

   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.

   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.

   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.

                                        7

                        AMERICAN ANNUITY GROUP, INC. 10-Q

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


   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.

   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 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  Separate
   account assets and related liabilities represent deposits maintained by
   several banks under a previously offered tax-deferred annuity program and,
   to a lesser extent, variable annuity deposits.  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 and its principal subsidiary, Great American Life
   Insurance Company("GALIC"), have separate tax allocation agreements with
   American Financial Corporation ("AFC"), a subsidiary of AFG, 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.  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 
                                        8

                        AMERICAN ANNUITY GROUP, INC. 10-Q

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


   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.

   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.

   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."

   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.


   Earnings Per Share  In 1997, AAG implemented SFAS No. 128, "Earnings Per
   Share."  This standard requires the presentation of basic and diluted
   earnings per share for entities with potentially dilutive securities.  Basic
   earnings per share are calculated using the weighted average number of
   shares of common stock outstanding during the period.  Diluted earnings per
   share include the effect of the assumed exercise of dilutive common stock
   options.   

   Comprehensive Income   Effective January 1, 1998, AAG implemented SFAS No.
   130, "Reporting Comprehensive Income."  SFAS No. 130 uses the term
   "comprehensive income" to describe the total of net earnings plus other
   comprehensive income.  For AAG, other comprehensive income represents the
   change in net unrealized gains on marketable securities net of deferred
   taxes and a reclassification adjustment for gains and losses included in net
   earnings.  Implementation of this statement had no impact on net earnings or
   stockholders' equity.  Prior periods have been restated to conform to the
   current presentation.

   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.  Acquisitions

   In March 1998, GALIC acquired Arkansas National Life Insurance Company for
   approximately $30 million using cash on hand.  

   In December 1997, AAG acquired GA Life for approximately $50 million in
   cash.  AAG funded the purchase with borrowings under its bank lines of
   credit.

   D.Investments

   The carrying value of AAG's fixed maturity portfolio was comprised of the
   following at March 31, 1998:
                                           Held to Available 
                                           Maturity for Sale  Total  
         U. S. Government and government
           agencies and authorities            -        6%       6%  
         States, municipalities and political                
           subdivisions                        1%       -        1   
         Public utilities                      5        2        7   
         Mortgage-backed securities           10       21       31   
         All other corporate                  18       37       55   
                                              34%      66%     100%  

   "Investing activities" related to fixed maturity investments in AAG's
   Statement of Cash Flows for the three months ending March 31, consisted of
   the following (in millions):
                                            Held toAvailable 
                                           Maturity for Sale  Total  
         1998
         Purchases                              -   ($285.7) ($285.7)
         Maturities and paydowns             $75.0     82.4    157.4 
         Sales                                18.3*    79.4     97.7 

         1997
         Purchases                           ($0.2) ($381.0) ($381.2)
         Maturities and paydowns              40.6     39.1     79.7 
         Sales                                  -     172.9    172.9 


* Sold (at a gain of $0.4 million) due to significant deterioration of the  
   issuers' creditworthiness.

   E. Investment in Affiliate

   Investment in affiliate reflects AAG's 4% ownership (2.7 million shares;
   carrying value of $19.1 million at March 31, 1998) of the common stock of
   Chiquita Brands International which is accounted for under the equity
   method.  AFG and its other subsidiaries own an additional 33% 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
   approximately $37 million at March 31, 1998 and $44 million at December 31,
   1997.    

   Included in equity in Chiquita's earnings for the first quarter of 1998 is a
   $0.9 million gain attributable to Chiquita's issuance of common stock.
                                        10

                        AMERICAN ANNUITY GROUP, INC. 10-Q

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


   F.  Unamortized Insurance Acquisition Costs

   Unamortized insurance acquisition costs consisted of the following (in
   millions):
                                                 March 31, December 31,
                                                     1998         1997 
           Deferred policy acquisition costs       $311.2       $300.6 
           Present value of future profits acquired 100.9        102.0 
           Unearned revenues                       (140.0)      (141.0)
                                                   $272.1       $261.6 
   G.Notes Payable

   Notes payable consisted of the following (in millions):

                                                 March 31, December 31,
                                                     1998         1997 
           
           Direct obligations of AAG               $  1.3       $  1.3 
           Obligations of AAG Holding (guaranteed by AAG):
             Unsecured Bank Credit Line due 2003    157.0           -  
             Secured Bank Credit Line due 1999         -          75.0 
             Unsecured Bank Credit Line due 1998       -          32.0 
             11-1/8% Senior Subordinated Notes
               due 2003                                -          24.1         
             Other subsidiary debt                    3.3          3.4 
                Total                              $161.6       $135.8 

   In January 1998, AAG Holding replaced its existing bank lines with a new
   $200 million unsecured credit agreement.  Loans under the credit agreement
   mature from 2000 to 2003 and bear interest at floating rates based on prime
   or Eurodollar rates.  On February 2, 1998, AAG Holding borrowed $50 million
   under the new credit line and retired its 11-1/8% Notes realizing a pretax
   extraordinary loss of $1.2 million; included in the Notes retired by AAG
   Holding was approximately $24.3 million principal amount of 11-1/8% Notes
   previously acquired by AAG and GALIC.

   At March 31, 1998, scheduled principal payments on debt for the remainder of
   1998 and the subsequent five years were as follows (in millions):

        1998       1999         2000        2001        2002         2003    
        $0.6       $0.8         $0.8       $37.6       $60.5        $60.5    

   At March 31, 1998 and December 31, 1997, the weighted average interest rate
   on amounts borrowed under AAG Holding's bank credit lines was 6.19% and
   6.80%, respectively.
                                        11

                        AMERICAN ANNUITY GROUP, INC. 10-Q

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


   H. Mandatorily Redeemable Preferred Securities of Subsidiary Trusts

      Wholly-owned subsidiary trusts of AAG Holding have issued $225
      million of preferred securities and, in turn, purchased $225 million
      of newly-issued AAG Holding subordinated debt which provide interest
      and principal payments to fund the Trusts' obligations.  The
      preferred securities are mandatorily redeemable upon maturity or
      redemption of the subordinated debt.  The three preferred securities
      issues are summarized as follows:

       Date of                                                   Optional 
       Issuance      Issue (Maturity Date)     Amount          Redemption Dates 
      November 1996    9-1/4% TOPrS* (2026)   $75,000,000       On or after    
                                                                 11/7/2001
      March 1997       8-7/8% Preferred
                          Securities (2027)    75,000,000       On or after
                                                                3/1/2007
      May 1997         7-1/4% ROPES** (2041)      75,000,000       Prior to
                                                                9/28/2000 and 
                                                             after 9/28/2001
    
               *  Trust Originated Preferred Securities
               ** Remarketed Par Securities

   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.  

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

   At March 31, 1998, there were 3.0 million shares of AAG Common Stock
   reserved for issuance under AAG's Employee Stock Option Plan.  Under the
   Stock Option Plan, the exercise price of each option equals the market price
   of AAG Common Stock at the date of grant.  Options become exercisable at the
   rate of 20% per year commencing one year after grant.  All options expire
   ten years after the date of grant.

           "Retained earnings since January 1, 1993" reflects
           accumulated changes in AAG's retained earnings since its
           acquisition of GALIC.

   The change in net unrealized gains on marketable securities for the three
   months ended March 31 included the following (in millions):

                                         1998              1997            
                                  Pretax Taxes   Net  Pretax Taxes  Net 
   Unrealized holding gains
    (losses) on securities
    arising during the period       $5.9 ($2.0) $3.9 ($60.2) $21.1 ($39.1)
   Less reclassification
    adjustment for gains realized
     in net income                  (1.8)  0.6  (1.2)  (0.3)   0.1   (0.2)
   Change in net unrealized gains
     on marketable securities       $4.1 ($1.4) $2.7 ($60.5) $21.2 ($39.3)

                                        12

                        AMERICAN ANNUITY GROUP, INC. 10-Q

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


   J.      Earnings Per Share 

   The number of common shares outstanding used in calculating diluted earnings
   per share in the first quarter of 1998 and 1997, respectively, includes 0.7
   million shares and 0.2 million shares for the effect of the assumed exercise
   of AAG's outstanding stock options.

   K.      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.

   L.      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):

                                            March 31, December 31,
                                                1998         1997 
                Capital and surplus           $325.5       $317.0 
                Asset valuation reserve         61.3         64.7 
                Interest maintenance reserve    24.2         23.9 

                                        Three months ended March 31,
                                                1998         1997 
                Pretax income from operations  $20.1        $21.3 
                Net income from operations      16.2         16.8 
                Net income                      16.0         18.2 

       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, 1997, GALIC may pay $73.6 million in dividends in
   1998 without prior approval.  In the first three months of 1998, AAG
   received $8.0 million in capital distributions from GALIC.
                                        13

                        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 and for the payment of interest and principal on
   borrowings and shareholder dividends.

   Forward-Looking Statements   The Private Securities Litigation Reform Act of
   1995 encourages corporations to provide investors with information about the
   company's anticipated performance and provides protection from liability if
   future results are not the same as management's expectations.  This document
   contains certain forward-looking statements that are based on assumptions
   which management believes are reasonable, but, by their nature, inherently
   uncertain.  Future results could differ materially from those projected. 
   Factors that could cause such differences include, but are not limited to: 
   changes in economic conditions, regulatory actions and competitive
   pressures.  AAG undertakes no obligation to update any forward-looking
   statements.  

   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.


                                                Three months ended          
                                                    March 31,    
                                                 1998   1997
                                                            
             Earnings to fixed charges            5.7    5.9
                                                             
             Earnings to fixed charges plus
               preferred dividends                5.7    4.6

                                                     
                                            March 31,December 31,  
                                                1998        1997   
             Consolidated debt to capital,
               excluding unrealized gains on
               fixed maturity investments         26%  25%         

   For purposes of the calculations of consolidated debt to capital,
   consolidated debt includes the Company's notes payable and its Remarketed
   Par Securities ("ROPES") which were issued in May 1997.  Capital represents
   the sum of notes payable, redeemable preferred securities of subsidiary
   trusts (including ROPES), preferred stock and common equity.  
                                                     
   At March 31, 1998, AAG (parent) had approximately $90 million of
   unrestricted cash and marketable investments on hand.  If AAG had used this
   amount to retire outstanding bank debt, its consolidated debt to capital
   ratio would have been 18% at March 31, 1998.
                                        14

                        AMERICAN ANNUITY GROUP, INC. 10-Q

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


   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 March 31, 1998, the capital ratios of
   each of AAG's principal insurance subsidiaries was at least 4.3 times its
   authorized control level RBC. 

   Sources and Uses of Funds  The ability of AAG and AAG Holding 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 its principal
   subsidiary, 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.  In the first quarter of 1998, GALIC made $6 million in such
   payments, net of capital contributions received from AAG Holding.
   The maximum amount of dividends payable by GALIC during the remainder of
   1998 without prior regulatory approval is $66 million.

   Since year end 1996 (through March 1998), AAG has retired $65 million
   principal amount of its public debentures and $49 million of preferred
   stock.  In addition, AAG acquired Great American Life Assurance Company of
   Puerto Rico, Inc. ("GA Life") for approximately $50 million in December
   1997.  AAG funded these outlays with issuances of trust preferred
   securities, bank borrowings, dividends from GALIC and cash on hand. 

   Including cash and investments on hand and the unused availability under a
   bank line of credit, AAG and AAG Holding had more than $130 million of
   liquidity at May 1, 1998.  The March 1998 acquisition of Arkansas National
   Life Insurance Company was completed using cash on hand at GALIC.  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's operations.

   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 March 31, 1998:

         NAIC                                       % of Total 
         Rating  Comparable S&P Rating             Market Value
            1    AAA, AA, A                               66%  
            2    BBB                                      26   
                      Total investment grade              92   
            3    BB                                        4   
            4    B                                         3   
            5    CCC, CC, C                                1   
            6    D                                         -   
                      Total non-investment grade           8   
                      Total fixed maturities             100%  

                                        15

                        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 March
   31, 1998.  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 March 31, 1998, AAG had less than 2% of total assets invested in mortgage
   loans and real estate, the majority of which had been purchased within the
   last five years.

   At March 31, 1998, AAG's mortgage-backed securities ("MBSs") portfolio
   represented less than one-third of fixed maturity investments.  AAG invests
   primarily in MBSs which have a lower 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 reduce
   the effect of prepayments on earnings over the anticipated life of the MBS
   portfolio.

   Nearly 90% of AAG'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, AAG does not believe a
   material risk (relative to earnings or liquidity) is inherent in holding
   such investments.

   Uncertainties
        Contingencies  A managing general agency which produced approximately
   one-sixth of GALIC's premiums in the first quarter 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.  This agent no longer markets
   products for GALIC.  The ultimate outcome is not expected to have a material
   adverse impact on the financial condition of the Company.



                                        16





                        AMERICAN ANNUITY GROUP, INC. 10-Q

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

     
   RESULTS OF OPERATIONS

   General    The operations of GA Life are included in AAG's consolidated
   financial statements from the date of acquisition in December 1997.    

   The Company's principal products are Single Premium Deferred Annuities
   ("SPDAs") and Flexible Premium Deferred Annuities ("FPDAs").  The following
   table summarizes AAG's premiums for annuities and other forms of life and
   health insurance (in millions):

                                              Three months ended 
                                                   March 31,            
                                                1998      1997 
      Retirement Annuities:
        SPDAs                                   $ 52      $ 70         
        FPDAs - renewal                           38        43 
        FPDAs - first year                         7         8 
        Variable annuities - flexible premium      4         1 
        Variable annuities - single premium       13         6 
      Pre-need life insurance                     23        13 
      Pre-need annuities                           8        12 
      Other life insurance                        18         6 
      Accident and health insurance                5         5 
        Total premiums                          $168      $164  
      
   The decrease in fixed annuity sales reflects primarily the decrease of SPDA
   business written by GALIC's former largest premium producing agency which
   wrote $20 million of business in the first quarter of 1997.  GALIC ceased
   writing business through this agency in 1997 (see "Management's Discussion
   and Analysis - Contingencies").
         
   Management believes that the success of the stock market and the recent
   interest rate environment have also resulted in decreased sales and
   increased surrenders and annuitizations of GALIC's fixed annuities. 
   Premiums from GA Life and increased sales of variable annuities helped
   offset the decrease in GALIC's sales.

   Pretax Operating Earnings  Pretax earnings from operations (before realized
   gains and equity in net earnings of affiliate) for the first quarter of 1998
   and 1997 were $25.5 million and $24.1 million, respectively.  

   Net Investment Income  Net investment income increased 6% in 1998 over the
   comparable three month period in 1997 due primarily to an increase in the
   Company's average fixed maturity investment base.  This increase was
   partially offset by decreasing market interest rates.  Investment growth
   resulted from acquisitions, internal cash flow generated by AAG's insurance
   operations and the investment of a portion of the proceeds from the issuance
   of trust preferred securities.  Investment income is shown net of investment
   expenses of $800,000 in 1998 and $1.0 million in 1997.  Lower investment
   expenses in 1998 reflect a decrease in fees charged by an affiliate.


                                        17

                        AMERICAN ANNUITY GROUP, INC. 10-Q

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


   Life, Accident and Health Premiums and Benefits   Increases in life,
   accident and health premiums and benefits reflect the acquisition of GA Life
   and increased sales of pre-need life insurance through the largest owner of
   funeral homes in the world.  

   Equity in Net Earnings of Affiliate  Equity in net earnings of affiliate
   represents AAG's proportionate share of the results of Chiquita Brands
   International.  Chiquita reported net income for the first quarter of 1998
   and 1997 of $41 million and $43 million, respectively.  Included in equity
   in Chiquita's first quarter 1998 earnings is a gain attributable to
   Chiquita's issuance of common stock.    

   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 3% in the first quarter
   of 1998 compared to the same period in 1997 due primarily to an increase in
   average annuity benefits accumulated.
     
   Amortization of Insurance Acquisition Costs   Amortization of insurance
   acquisition costs includes certain commissions on sales of life insurance
   products.  The increase in 1998 reflects the acquisition of GA Life as well
   as increased sales of pre-need life insurance products.  The costs in 1998
   and 1997 also include $2.4 million and $1.9 million, respectively, of
   amortization of the present value of future profits.

   Trust Preferred Distribution Requirement  Trust preferred distribution
   requirement represents amounts accrued on preferred securities issued by
   subsidiaries of AAG Holding in 1997 and 1996.  A portion of the proceeds
   from these issuances was used to retire debt.

   Interest and Other Debt Expenses  Interest expense decreased in the first
   quarter of 1998 compared to the same period in 1997 despite an increase in
   average debt outstanding.  In 1997 and 1998, AAG retired its 9-1/2% Notes
   and 11-1/8% Notes, replacing them with bank borrowings having a
   significantly lower interest rate.  

   Other Expenses   Other expenses increased in the first quarter of 1998
   compared to the same period in 1997 reflecting primarily the acquisition of
   GA Life.  

   Extraordinary Item   Extraordinary item reflects AAG's losses, net of tax,
   on prepayment of its debt.

   New Accounting Standard to be Implemented   The Financial Accounting
   Standards Board issued Statement of Financial Accounting Standard ("SFAS")
   No. 131, "Disclosures about Segments of an Enterprise and Related
   Information," which is scheduled to become effective during the fourth
   quarter of 1998.  The implementation of SFAS No. 131 will have no effect on
   AAG's financial position or net income.
    
                                        18

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




                                      ITEM 6

                         Exhibits and Reports on Form 8-K

   (a)   Exhibit 27 - Financial Data Schedule as of March 31, 1998.  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.



   May 15, 1998                       BY:/s/William J. Maney             
                                         William J. Maney
                                         Senior Vice President, Treasurer
                                           and Chief Financial Officer
                                        19