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SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549





FORM 10-Q





Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

|For the Quarterly Period Ended
September 30, 2003 | Commission File
No. 1-11632
|------------------------------------------------- | ---------------------------

GREAT AMERICAN FINANCIAL RESOURCES, INC.

|Incorporated under   | IRS Employer I.D.
|-------------------- | -----------------
|the Laws of Delaware | No. 06-1356581   

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

Indicate by check mark whether the Registrant is an accelerated filer.    YesX    No
As of November 1, 2003, there were 46,915,192 shares of the Registrant's Common Stock outstanding.







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GREAT AMERICAN FINANCIAL RESOURCES, INC.



TABLE OF CONTENTS







|Part I        | Financial Information                                                                                                                  | Page
|------------- | -------------------------------------------------------------------------------------------------------------------------------------- | ----
|Item 1        | Financial Statements:                                                                                                                  |     
|              | Consolidated Balance Sheet                                                                                                             | 2   
|              | Consolidated Income Statement                                                                                                          | 3   
|              | Consolidated Statement of Changes in Stockholders' Equity                                                                              | 4   
|              | Consolidated Statement of Cash Flows                                                                                                   | 5   
|              | Notes to Consolidated Financial Statements                                                                                             | 6   
|Item 2        | Management's Discussion and Analysis of Financial Condition                                                                            |     
|              | and Results of Operations                                                                                                              | 22  
|Item 3        | Quantitative and Qualitative Disclosure of Market Risk                                                                                 | 33  
|Item 4        | Evaluation of Disclosure Controls and Procedures                                                                                       | 33  
|              |                                                                                                                                        |     
|              |                                                                                                                                        |     
|Part II       | Other Information                                                                                                                      |     
|Item 6        | Exhibits and Reports on Form 8-K                                                                                                       | 34  
|              | Signature                                                                                                                              | 34  
|              |                                                                                                                                        |     
|              |                                                                                                                                        |     
|Exhibit Index |                                                                                                                                        |     
|Exhibit 31(a) | Certification of the Chief Executive Officer Pursuant to 
Section 302(a)of the Sarbanes-Oxley Act of 2002                              | E-1 
|Exhibit 31(b) | Certification of the Chief Financial Officer Pursuant to
Section 302(a)of the Sarbanes-Oxley Act of 2002                               | E-2 
|Exhibit 32    | Certification of the Chief Executive Officer and the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | E-3 







GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

PART I

FINANCIAL INFORMATION



GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Dollars in millions)

|                                                 |               |             
|------------------------------------------------ | ------------- | ------------
|                                                 |               |             
|                                                 | September 30, | December 31,
|                                                 | 2003          | 2002        
|Assets                                           |               |             
|Investments:                                     |               |             
|Fixed maturities - at market                     |               |             
|(amortized cost - $7,656.7 and $6,894.1)         | $ 8,015.8     | $7,181.1    
|Equity securities - at market                    |               |             
|(cost - $46.2 and $47.0)                         | 76.0          | 73.5        
|Mortgage loans on real estate                    | 15.9          | 18.9        
|Real estate                                      | 80.3          | 78.6        
|Policy loans                                     | 215.3         | 214.9       
|Short-term investments                           | 503.8         | 400.0       
|Total investments                                | 8,907.1       | 7,967.0     
|                                                 |               |             
|Cash                                             | 0.9           | 2.2         
|Accrued investment income                        | 93.0          | 95.3        
|Unamortized insurance acquisition costs, net     | 613.2         | 591.0       
|Other assets                                     | 375.6         | 252.0       
|Variable annuity assets (separate accounts)      | 509.0         | 455.1       
|                                                 |               |             
|                                                 | $10,498.8     | $9,362.6    
|                                                 |               |             
|Liabilities and Capital                          |               |             
|Annuity benefits accumulated                     | $ 6,867.0     | $6,453.9    
|Life, accident and health reserves               | 964.9         | 902.4       
|Notes payable                                    | 192.1         | 250.3       
|Payable to subsidiary trust (issuer of           |               |             
|preferred securities)                            | 20.0          | -           
|Payable to affiliates, net                       | 95.4          | 62.4        
|Deferred taxes on unrealized gains               | 109.9         | 93.3        
|Payable for securities purchased                 | 494.2         | 16.6        
|Accounts payable, accrued expenses and other     |               |             
|liabilities                                      | 122.9         | 133.8       
|Variable annuity liabilities (separate accounts) | 509.0         | 455.1       
|Total liabilities                                | 9,375.4       | 8,367.8     
|                                                 |               |             
|                                                 |               |             
|Mandatorily redeemable preferred securities      |               |             
|of consolidated subsidiary trusts                | 142.9         | 142.9       
|                                                 |               |             
|                                                 |               |             
|Stockholders' Equity:                            |               |             
|Common Stock, $1 par value                       |               |             
|-100,000,000 shares authorized                   |               |             
|-46,913,560 and 42,456,843 shares outstanding    | 46.9          | 42.4        
|Capital surplus                                  | 405.3         | 347.6       
|Retained earnings                                | 317.1         | 281.9       
|Unrealized gains on marketable securities, net   | 211.2         | 180.0       
|Total stockholders' equity                       | 980.5         | 851.9       
|                                                 |               |             
|                                                 | $10,498.8     | $9,362.6    
|                                                 |               |             





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENT

(In millions, except per share amounts)





|Three months ended                                                       | Nine months ended
|------------------------------------------------------------------------ | -----------------
|September 30,                                                            | September 30,    
|                                                                         | 2003             
|Revenues:                                                                |                  
|Life, accident and health premiums                                       | $ 83.9           
|Net investment income                                                    | 127.1            
|Realized gains (losses) on investments                                   | 0.7              
|Other income                                                             | 26.9             
|                                                                         | 238.6            
|Costs and Expenses:                                                      |                  
|Annuity benefits                                                         | 71.5             
|Life, accident and health benefits                                       | 63.0             
|Insurance acquisition expenses                                           | 27.4             
|Preferred distribution requirement on     consolidated subsidiary trusts | 3.2              
|Other interest and debt expenses                                         | 3.0              
|Other expenses                                                           | 41.2             
|                                                                         | 209.3            
|                                                                         |                  
|Operating earnings before income taxes                                   | 29.3             
|Provision (credit) for income taxes                                      | 9.4              
|                                                                         |                  
|Income before accounting change                                          | 19.9             
|Cumulative effect of accounting change,   net of tax                     | -                
|                                                                         |                  
|Net Income                                                               | $ 19.9           
|                                                                         |                  
|                                                                         |                  
|Basic earnings per common share:                                         |                  
|Income before accounting change                                          | $ 0.46           
|Accounting change                                                        | -                
|Net income                                                               | $ 0.46           
|                                                                         |                  
|Diluted earnings per common share:                                       |                  
|Income before accounting change                                          | $ 0.46           
|Accounting change                                                        | -                
|Net income                                                               | $ 0.46           
|                                                                         |                  
|Average number of common shares:                                         |                  
|Basic                                                                    | 43.0             
|Diluted                                                                  | 43.0             
|                                                                         |                  





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(In millions)

|                                           | Nine months ended
|------------------------------------------ | -----------------
|                                           | September 30,    
|                                           | 2003             
|Common Stock:                              |                  
|Balance at beginning of period             | $ 42.4           
|Common Stock issued                        | 4.5              
|Common Stock retired                       | -                
|Balance at end of period                   | $ 46.9           
|                                           |                  
|                                           |                  
|Capital Surplus:                           |                  
|Balance at beginning of period             | $347.6           
|Common Stock issued                        | 58.2             
|Common Stock retired                       | (0.5)            
|Balance at end of period                   | $405.3           
|                                           |                  
|                                           |                  
|Retained Earnings:                         |                  
|Balance at beginning of period             | $281.9           
|Net income                                 | 35.2             
|Balance at end of period                   | $317.1           
|                                           |                  
|                                           |                  
|Unrealized Gains, Net:                     |                  
|Balance at beginning of period             | $180.0           
|Change during period                       | 31.2             
|Balance at end of period                   | $211.2           
|                                           |                  
|                                           |                  
|                                           |                  
|                                           |                  
|Comprehensive Income                       |                  
|Net income                                 | $ 35.2           
|Other comprehensive income - change in net |                  
|unrealized gains                           | 31.2             
|Comprehensive income                       | $ 66.4           
|                                           |                  





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(In millions)



|                                                         | Nine months ended
|-------------------------------------------------------- | -----------------
|                                                         | September 30,    
|                                                         | 2003             
|Cash Flows from Operating Activities:                    |                  
|Net income                                               | $   35.2         
|Adjustments:                                             |                  
|Cumulative effect of accounting change                   | -                
|Increase in life, accident and health reserves           | 62.5             
|Benefits to annuity policyholders                        | 227.2            
|Amortization of insurance acquisition costs              | 87.0             
|Depreciation and amortization                            | 14.6             
|Realized losses on investments                           | 11.2             
|Increase in insurance acquisition costs                  | (118.8)          
|Increase in other assets                                 | (13.8)           
|Decrease in other liabilities                            | (32.3)           
|Increase (decrease) in payable to affiliates, net        | 33.0             
|Other, net                                               | 10.5             
|                                                         | 316.3            
|                                                         |                  
|Cash Flows from Investing Activities:                    |                  
|Purchases of and additional investments in:              |                  
|Fixed maturity investments                               | (4,059.4)        
|Equity securities                                        | (12.1)           
|Subsidiaries and affiliates                              | -                
|Real estate, mortgage loans and other assets             | (6.9)            
|Maturities and redemptions of fixed maturity investments | 952.7            
|Sales of:                                                |                  
|Fixed maturity investments                               | 2,686.9          
|Equity securities                                        | 19.5             
|Real estate, mortgage loans and other assets             | 3.2              
|Cash and short term investments of acquired subsidiaries | -                
|Decrease (increase) in policy loans                      | (0.4)            
|                                                         | (416.5)          
|                                                         |                  
|Cash Flows from Financing Activities:                    |                  
|Fixed annuity receipts                                   | 592.8            
|Annuity surrenders, benefits and withdrawals             | (417.6)          
|Net transfers from variable annuity assets               | 4.1              
|Additions to notes payable                               | 8.0              
|Reductions of notes payable                              | (66.2)           
|Issuance of Common Stock                                 | 62.7             
|Retirement of Common Stock                               | (0.5)            
|Issuance of Trust Preferred Securities                   | 19.4             
|                                                         | 202.7            
|                                                         |                  
|Net increase in cash and short-term investments          | 102.5            
|Beginning cash and short-term investments                | 402.2            
|Ending cash and short-term investments                   | $  504.7         
|                                                         |                  

5



GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





A.

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

American Financial Group, Inc. ("AFG") and its subsidiaries owned 82% of GAFRI's Common Stock at November 1, 2003.

B.

Basis of Presentation

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

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

Investments

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





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Derivatives

Goodwill

Reinsurance

To the extent that any reinsuring companies are unable to meet obligations under agreements covering reinsurance ceded, GAFRI's insurance subsidiaries would remain liable.  GAFRI reviews the financial condition of its reinsurers and monitors the amount of reinsurance it has with each company.

Insurance Acquisition Costs and Expenses

Insurance acquisition expenses in the income statement reflect primarily the amortization of DPAC and VOBA.  In addition, certain commission costs are expensed as paid and included in insurance acquisition expenses.  All other uncapitalized acquisition costs such as marketing and underwriting expenses are included in "Other expenses."

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

DPAC related to annuities and universal life insurance products is deferred to the extent deemed recoverable and 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 life and variable annuity 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.







GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

To the extent that realized gains and losses result in adjustments to the amortization of DPAC related to annuities, such adjustments are reflected as components of realized gains.  DPAC related to annuities is also adjusted, net of tax, for the change in amortization that would have been recorded if the unrealized gains (losses) from securities had actually been realized.  This adjustment is included in "Unrealized gains on marketable securities, net" in the stockholders' equity section of the Balance Sheet.

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.

Life and health insurance contracts are reviewed periodically using actuarial assumptions revised based on actual and anticipated experience, to determine if there is a potential premium deficiency.  If any such deficiency exists, it is recognized by a charge to income and a reduction in unamortized acquisition costs.

Present Value of Future Profits

These amounts are amortized with interest in relation to expected gross profits of the acquired policies for annuities and universal life products and in relation to the premium paying period for traditional life and health insurance products.

Annuity Benefits Accumulated

Reserves for two-tier annuities (annuities with different stated account values depending on whether a policyholder annuitizes, dies or surrenders) are generally recorded at the lower-tier value plus an additional reserve for expected deaths and annuitizations ("EDAR") that require payment of the upper-tier value.  The liability for EDAR is accrued for and modified using the same assumptions as used in determining DPAC and DPAC amortization.

Reserves for traditional single-tier fixed annuities are generally recorded at the stated annuitization value.

Life, Accident and Health Reserves





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



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

Variable Annuity Assets and Liabilities

Life, Accident and Health Premiums and Benefits

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

Mandatorily Redeemable Preferred Securities of Subsidiary Trusts

Income Taxes

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





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



Stock-Based Compensation

The following table illustrates the effect on net income (in millions) and earnings per share had compensation cost been recognized and determined based on "fair values" at grant dates consistent with the method prescribed by SFAS No. 123.  For SFAS No. 123 purposes, the "fair value" of $4.63 per option granted in the first nine months of 2003 and $6.09 for the first nine months of 2002 was

calculated using the Black-Scholes option pricing model and the following assumptions: dividend yield of less than 1%; expected volatility of 20%; risk-free interest rate of 3% for 2003 and 5% for 2002; and expected option life of 7.5 years.  There is no single reliable method to determine the actual value of options at grant date.  Accordingly, actual value of the option grants may be higher or lower than the SFAS No. 123 "fair value."



| | Three months ended                         | Nine months ended
| | ------------------------------------------ | -----------------
| | September 30,                              | September 30,    
| |                                            | 2003             
| | Net income, as reported                    | $19.9            
| | Pro forma stock option expense, net of tax | (0.4)            
| |                                            |                  
| | Adjusted net income                        | $19.5            
| |                                            |                  
| | Earnings per share (as reported):          |                  
| | Basic                                      | $0.46            
| | Diluted                                    | $0.46            
| |                                            |                  
| | Earnings per share (adjusted):             |                  
| | Basic                                      | $0.45            
| | Diluted                                    | $0.45            

Benefit Plans

Under the savings fund portion of the Plan, GAFRI matches a percentage of employee contributions.  Employees have been permitted to direct the investment of their contributions to independently managed investment funds.  Matching contributions to the savings fund portion of the Plan for the year 2003 will be invested in accordance with participant elections.  Company contributions to the Plan are charged against earnings in the year for which they are declared.

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

Earnings Per Share





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



Statement of Cash Flows

three months or less when purchased are considered to be cash equivalents for purposes of the financial statements.

C.	Acquisition

On June 28, 2002, GAFRI's principal insurance subsidiary acquired Manhattan National Life Insurance Company ("MNL") from a subsidiary of Conseco, Inc. for $48.5 million in cash.  While MNL is no longer writing new policies, as of September 30, 2003, it had approximately 80,000 policies in force (primarily term life).  GAFRI has reinsured 90% of this in force business.

D.	Segments of Operations

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

GAFRI's supplemental insurance businesses (United Teacher Associates Insurance Company ("UTA") and Loyal American Life Insurance Company) offer a variety of supplemental health and life products.  UTA offers its products through independent agents.  In 2001, Loyal reinsured a substantial portion of its life insurance business and has reduced its marketing efforts in that line of business.

GA Life of Puerto Rico ("GAPR") sells in-home life and supplemental health products through a network of company-employed agents.  Sales in Puerto Rico accounted for 20% of GAFRI's life, accident and health premiums in the first nine months of 2003 and 2002.





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



Corporate and other consists primarily of GAFRI (parent) and AAG Holding (intermediate holding company). The following table shows GAFRI's revenues and operating profit by significant business segment (in millions):





|                                       | Three months ended | Nine months ended
|-------------------------------------- | ------------------ | -----------------
|                                       | September 30,      | September 30,    
|                                       | 2003               | 2002             
|Revenues                               |                    |                  
|Life and annuity products              | $150.7             | $165.2           
|Supplemental insurance products        | 67.1               | 58.4             
|GA Life of Puerto Rico                 | 19.3               | 18.2             
|Corporate and other                    | 0.8                | 1.3              
|Total operating revenues               | 237.9              | 243.1            
|                                       |                    |                  
|Realized gains (losses) on investments | 0.7                | (21.4)           
|Total revenues per income statement    | $238.6             | $221.7           
|                                       |                    |                  



|                                            |        |        |        |       
|------------------------------------------- | ------ | ------ | ------ | ------
|Operating profit - pretax                   |        |        |        |       
|Life and annuity products                   | $ 28.7 | $ 26.0 | $ 57.6 | $ 85.3
|Supplemental insurance products             | 5.7    | 2.0    | 16.8   | 5.7   
|GA Life of Puerto Rico                      | 3.0    | 3.1    | 9.0    | 8.8   
|Corporate and other                         | (8.8)  | (8.6)  | (23.1) | (25.8)
|Pretax earnings from operations             | 28.6   | 22.5   | 60.3   | 74.0  
|                                            |        |        |        |       
|Realized gains (losses) on investments      | 0.7    | (21.4) | (11.2) | (51.6)
|Total pretax income per income    statement | $ 29.3 | $  1.1 | $ 49.1 | $ 22.4





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



E.	Goodwill

Effective January 1, 2002, goodwill is no longer amortized but is subject to annual impairment testing.  GAFRI completed its initial test in the fourth quarter of 2002 which resulted in a $17.7 million after tax ($0.42 per diluted share) impairment charge reported by restating first quarter 2002 results for the cumulative effect of a change in accounting principle.

The impairment charge recorded in 2002 was primarily related to a decrease in estimated future earnings based upon lower forecasted new business sales over the next few years.

F.	Unamortized Insurance Acquisition Costs

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



|                                                  | September 30, | December 31,
|------------------------------------------------- | ------------- | ------------
|                                                  | 2003          | 2002        
|                                                  |              
|Deferred policy acquisition costs                 | $661.9        | $647.8      
|Present value of future profits acquired ("PVFP") | 64.4          | 66.8        
|Unearned revenues                                 | (113.1)       | (123.6)     
|                                                  | $613.2        | $591.0      

The PVFP amounts in the table above are net of $63.5 million and $57.3 million of accumulated amortization at September 30, 2003 and December 31, 2002, respectively.  Amortization of the PVFP was $6.2 million and $8.5 million during the first nine months of 2003 and 2002, respectively.  During each of the next five years, the PVFP is expected to decrease at a rate of approximately 13% of the balance at the beginning of each respective year.

G.	Notes Payable

Notes payable consisted of the following (in millions):



|                                                  | September 30, | December 31,
|------------------------------------------------- | ------------- | ------------
|                                                  | 2003          | 2002        
|                                                  |              
|Direct obligations of GAFRI                       | $  1.5        | $  1.7      
|Obligations of AAG Holding (guaranteed by GAFRI): |               |             
|6-7/8% Senior Notes due 2008                      | 100.0         | 100.0       
|Bank Credit Line                                  | 90.6          | 148.6       
|Total                                             | $192.1        | $250.3      

AAG Holding has an unsecured credit agreement with a group of banks under which it can borrow up to $155 million.  Borrowings bear interest at floating rates based on prime or Euro dollar rates and mature on December 31, 2004.  At September 30, 2003, the weighted-average interest rate on amounts borrowed under the credit line was 1.85%.

In the first nine months of 2003, AAG Holding paid down bank debt using the proceeds from the $20 million issuance of trust preferred securities, $30 million of the proceeds from the Common Stock rights offering and available cash.





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



In November 2003, the Company issued $112.5 million principal amount of 7-1/2%, 30 year Senior Debentures and used the majority of the proceeds to pay down all of the remaining amounts borrowed under the bank credit line.  See Note M - "Subsequent Event."

At September 30, 2003, scheduled principal payments on debt for the remainder of 2003 and the subsequent five years (adjusted to reflect the November 2003 pay down of the bank credit line) were as follows (in millions):



|2003 | 2004 | 2005 | 2006 | 2007 | 2008  
|---- | ---- | ---- | ---- | ---- | ------
|$  - | $0.2 | $0.2 | $0.2 | $0.1 | $100.1



H.	Mandatorily Redeemable Preferred Securities of Consolidated Subsidiary Trusts

Wholly-owned subsidiary trusts of GAFRI have issued preferred securities and, in turn, purchased from their parent company a like amount of subordinated debt which provides interest and principal payments to fund the trusts' obligations.  The preferred securities are mandatorily redeemable upon maturity or redemption of the subordinated debt.  GAFRI effectively provides an unconditional guarantee of the trusts' obligations.  The preferred securities of GAFRI's consolidated subsidiary trusts consisted of the following:



|Date of       |                       |             |             | Optional            
|------------- | --------------------- | ----------- | ----------- | --------------------
|Issuance      | Issue (Maturity Date) | 09/30/03    | 12/31/02    | Redemption Dates    
|November 1996 | 9-1/4% TOPrS  (2026)  | $72,912,500 | $72,912,500 | Currently redeemable
|March 1997    | 8-7/8% Pfd    (2027)  | 70,000,000  | 70,000,000  | On or after 3/1/2007

In May 2003, a newly formed wholly-owned subsidiary trust of GAFRI issued $20 million of trust preferred securities for proceeds of $20 million before issue costs of approximately $600,000.  Until May 2008, these securities pay interest quarterly at an annual rate of 7.35%, after which the interest rate will reset quarterly to an annual rate of Libor plus 4.1%.  The proceeds from this transaction were used primarily to pay down bank debt.  In accordance with FIN 46, variable interest entities that issue preferred securities subsequent to January 31, 2003, are not consolidated for reporting purposes.  The $20 million in subordinated debt due this trust is shown as a liability in the Balance Sheet, and the related interest expense is included in "Other interest and debt expenses" in the Income Statement.

I.	Stockholders' Equity

At September 30, 2003, there were 5.3 million shares of GAFRI Common Stock reserved for issuance under GAFRI's stock option plans for employees and directors.  Under these plans, the exercise price of each option equals the market price of GAFRI Common Stock at the date of grant.  Options generally become exercisable at the rate of 20% per year commencing one year after grant.  All options expire ten years after the date of grant.

The change in net unrealized gains on marketable securities for the nine months

ended September 30 included the following (in millions):



|                                                                   | 2003   | 2002   
|------------------------------------------------------------------ | ------ | -------
|                                                                   | Pretax | Taxes  
|Unrealized holding gains on
  securities arising during the period | $36.4  | ($12.5)
|Realized losses on securities                                      | 11.4   | (4.1)  
|Change in net unrealized gains on
  marketable securities          | $47.8  | ($16.6)





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



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

In September 2003, GAFRI raised approximately $60 million through the sale of 4.3 million common shares in a rights offering.  In the offering, AFG purchased 3.5 million shares and Carl H. Lindner, the Company's Chairman of the Board, purchased 0.4 million shares.

J.	Earnings Per Share

The number of common shares outstanding used in calculating diluted earnings per share in the third quarter and first nine months of 2002 includes 0.2 million shares and 0.3 million shares, respectively, for the effect of the assumed exercise of GAFRI's stock options.

K.	Contingencies

There have been no significant changes to the matters discussed and referred to in Note O "Contingencies" of GAFRI's Annual Report on Form 10-K for 2002.

L.	Additional Information

Statutory Information



|                                | September 30, | December 31,
|------------------------------- | ------------- | ------------
|                                | 2003          | 2002        
|Capital and surplus             | $467.7        | $418.6      
|Asset valuation reserve         | 59.9          | 61.2        
|Interest maintenance reserve    | 25.3          | 26.0        
|                                |               |             
|Nine months ended September 30,
|                                | 2003          | 2002        
|Pretax income from operations   | $51.9         | $47.5       
|Net income (loss)               | 19.6          | (33.7)      

Dividends which can be paid by GAFRI's insurance subsidiaries, without prior approval of regulatory authorities, are subject to restrictions relating to capital and surplus and statutory net income.  Based on capital and surplus at December 31, 2002, GALIC and GAPR may pay $41.9 million and $25.8 million, respectively, in dividends in 2003 without prior approval.  In the first nine months of 2003, GALIC paid a dividend of $11.0 million and GAPR paid a dividend of $1.2 million to GAFRI.  In the first nine months of 2003, GAFRI made capital contributions to GALIC of $37.2 million.





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



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

CONDENSED CONSOLIDATING BALANCE SHEET

(In millions)





|                                                                                      |          | AAG      | CONS   | ALL OTHER | CONS       |          
|------------------------------------------------------------------------------------- | -------- | -------- | ------ | --------- | ---------- | ---------
|SEPTEMBER 30, 2003                                                                    | GAFRI    | HOLDING  | TRUSTS | SUBS      | ENTRIES    | CONS     
|                                                                                      |          |          |        |           |            |          
|Assets                                                                                |          |          |        |           |            |          
|Cash and investments                                                                  | $    6.7 | $    0.1 | $   -  | $ 8,901.2 | $     -    | $ 8,908.0
|Investment in subsidiaries                                                            | 924.7    | 1,290.5  | -      | 7.3       | (2,222.5)  | -        
|Notes receivable from AAG Holding                                                     | 102.4    | -        | 154.6  | -         | (257.0)    | -        
|Unamortized insurance acquisition 
    costs, net                                     | -        | -        | -      | 613.2     | -          | 613.2    
|Other assets                                                                          | 17.4     | 2.1      | 2.9    | 407.4     | 38.8       | 468.6    
|Variable annuity assets 
    (separate accounts)                                      | -        | -        | -      | 509.0     | -          | 509.0    
|                                                                                      | $1,051.2 | $1,292.7 | $157.5 | $10,438.1 | ($2,440.7) | $10,498.8
|                                                                                      |          |          |        |           |            |          
|Liabilities and Capital                                                               |          |          |        |           |            |          
|Insurance liabilities                                                                 | $     -  | $     -  | $   -  | $ 7,837.7 | ($    5.8) | $ 7,831.9
|Notes payable to GAFRI                                                                | -        | 102.4    | -      | -         | (102.4)    | -        
|Other notes payable                                                                   | 1.5      | 190.6    | -      | -         | -          | 192.1    
|Payable to subsidiary trust                                                           | -        | 20.6     | -      | -         | (0.6)      | 20.0     
|Notes payable to consolidated 
    subsidiary trusts                                  | -        | 154.6    | -      | -         | (154.6)    | -        
|Other liabilities                                                                     | 69.2     | 22.2     | 2.9    | 732.0     | (3.9)      | 822.4    
|Variable annuity liabilities
    (separate accounts)                                  | -        | -        | -      | 509.0     | -          | 509.0    
|                                                                                      | 70.7     | 490.4    | 2.9    | 9,078.7   | (267.3)    | 9,375.4  
|                                                                                      |          |          |        |           |            |          
|Mandatorily redeemable preferred
    securities of consolidated
    subsidiary trusts | -        | -        | 150.0  | -         | (7.1)      | 142.9    
|                                                                                      |          |          |        |           |            |          
|Total stockholders' equity                                                            | 980.5    | 802.3    | 4.6    | 1,359.4   | (2,166.3)  | 980.5    
|                                                                                      | $1,051.2 | $1,292.7 | $157.5 | $10,438.1 | ($2,440.7) | $10,498.8





|                                                                                       |        |          |        |          |            |         
|-------------------------------------------------------------------------------------- | ------ | -------- | ------ | -------- | ---------- | --------
|DECEMBER 31, 2002                                                                      |        |          |        |          |            |         
|                                                                                       |        |          |        |          |            |         
|Assets                                                                                 |        |          |        |          |            |         
|Cash and investments                                                                   | $  3.5 | $     -  | $   -  | $7,967.3 | ($    1.6) | $7,969.2
|Investment in subsidiaries                                                             | 801.1  | 1,193.4  | -      | 0.9      | (1,995.4)  | -       
|Notes receivable from AAG Holding                                                      | 102.4  | -        | 154.6  | -        | (257.0)    | -       
|Unamortized insurance acquisition 
    costs, net                                      | -      | -        | -      | 591.0    | -          | 591.0   
|Other assets                                                                           | 18.3   | 1.4      | 4.7    | 287.9    | 35.0       | 347.3   
|Variable annuity assets 
    (separate accounts)                                       | -      | -        | -      | 455.1    | -          | 455.1   
|                                                                                       | $925.3 | $1,194.8 | $159.3 | $9,302.2 | ($2,219.0) | $9,362.6
|                                                                                       |        |          |        |          |            |         
|Liabilities and Capital                                                                |        |          |        |          |            |         
|Insurance liabilities                                                                  | $   -  | $     -  | $   -  | $7,361.8 | ($    5.5) | $7,356.3
|Notes payable to GAFRI                                                                 | -      | 102.4    | -      | 0.1      | (102.5)    | -       
|Notes payable to consolidated 
    subsidiary trusts                                   | -      | 154.6    | -      | -        | (154.6)    | -       
|Other notes payable                                                                    | 1.7    | 248.6    | -      | -        | -          | 250.3   
|Other liabilities                                                                      | 71.7   | 7.4      | 4.7    | 231.3    | (9.0)      | 306.1   
|Variable annuity liabilities
    (separate accounts)                                   | -      | -        | -      | 455.1    | -          | 455.1   
|                                                                                       | 73.4   | 513.0    | 4.7    | 8,048.3  | (271.6)    | 8,367.8 
|                                                                                       |        |          |        |          |            |         
|Mandatorily redeemable preferred 
    securities of consolidated     subsidiary trusts | -      | -        | 150.0  | -        | (7.1)      | 142.9   
|                                                                                       |        |          |        |          |            |         
|Total stockholders' equity                                                             | 851.9  | 681.8    | 4.6    | 1,253.9  | (1,940.3)  | 851.9   
|                                                                                       | $925.3 | $1,194.8 | $159.3 | $9,302.2 | ($2,219.0) | $9,362.6





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

CONDENSED CONSOLIDATING INCOME STATEMENT

(In millions)







|FOR THE THREE MONTHS ENDED              |       | AAG     | CONS   | ALL OTHER | CONS    |       
|--------------------------------------- | ----- | ------- | ------ | --------- | ------- | ------
|SEPTEMBER 30, 2003                      | GAFRI | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS  
|                                        |       |         |        |           |         |       
|Revenues:                               |       |         |        |           |         |       
|Life, accident and health premiums      | $  -  | $  -    | $  -   | $ 83.9    | $  -    | $ 83.9
|Net investment income and other revenue | 4.5   | -       | -      | 152.6     | (2.4)   | 154.7 
|Interest income on AAG Holding notes    | -     | -       | 3.5    | -         | (3.5)   | -     
|Equity in earnings of subsidiaries      | 27.1  | 35.0    | -      | -         | (62.1)  | -     
|                                        | 31.6  | 35.0    | 3.5    | 236.5     | (68.0)  | 238.6 
|                                        |       |         |        |           |         |       
|Costs and Expenses:                     |       |         |        |           |         |       
|Insurance benefits and expenses         | -     | -       | -      | 161.9     | -       | 161.9 
|Interest expense (consolidated trusts)  | -     | 3.5     | -      | -         | (3.5)   | -     
|Other interest and debt expenses        | -     | 5.4     | -      | -         | 0.8     | 6.2   
|Other expenses                          | 2.3   | 1.9     | -      | 37.1      | (0.1)   | 41.2  
|                                        | 2.3   | 10.8    | -      | 199.0     | (2.8)   | 209.3 
|                                        |       |         |        |           |         |       
|Earnings before income taxes            | 29.3  | 24.2    | 3.5    | 37.5      | (65.2)  | 29.3  
|Provision for income taxes              | 9.4   | 8.4     | -      | 12.1      | (20.5)  | 9.4   
|                                        |       |         |        |           |         |       
|Net income                              | $19.9 | $15.8   | $ 3.5  | $ 25.4    | ($44.7) | $ 19.9







|FOR THE NINE MONTHS ENDED               |       |       |       |        |          |       
|--------------------------------------- | ----- | ----- | ----- | ------ | -------- | ------
|SEPTEMBER 30, 2003                      |       |       |       |        |          |       
|                                        |       |       |       |        |          |       
|Revenues:                               |       |       |       |        |          |       
|Life, accident and health premiums      | $  -  | $  -  | $  -  | $246.6 | $   -    | $246.6
|Net investment income and other revenue | 15.0  | -     | -     | 429.9  | (8.3)    | 436.6 
|Interest income on AAG Holding notes    | -     | -     | 10.5  | -      | (10.5)   | -     
|Equity in earnings of subsidiaries      | 40.1  | 63.1  | -     | -      | (103.2)  | -     
|                                        | 55.1  | 63.1  | 10.5  | 676.5  | (122.0)  | 683.2 
|                                        |       |       |       |        |          |       
|Costs and Expenses:                     |       |       |       |        |          |       
|Insurance benefits and expenses         | -     | -     | -     | 499.6  | -        | 499.6 
|Interest expense (consolidated trusts)  | -     | 10.5  | -     | -      | (10.5)   | -     
|Other interest and debt expenses        | 0.1   | 15.6  | -     | -      | 2.5      | 18.2  
|Other expenses                          | 5.9   | 5.4   | -     | 106.7  | (1.7)    | 116.3 
|                                        | 6.0   | 31.5  | -     | 606.3  | (9.7)    | 634.1 
|                                        |       |       |       |        |          |       
|Earnings before income taxes            | 49.1  | 31.6  | 10.5  | 70.2   | (112.3)  | 49.1  
|Provision for income taxes              | 13.9  | 10.5  | -     | 20.7   | (31.2)   | 13.9  
|                                        |       |       |       |        |          |       
|Net income                              | $35.2 | $21.1 | $10.5 | $ 49.5 | ($ 81.1) | $ 35.2
|                                        |       |       |       |        |          |       







GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

CONDENSED CONSOLIDATING INCOME STATEMENT

(In millions)







|FOR THE THREE MONTHS ENDED              |       | AAG     | TOTAL  | ALL OTHER | CONS    |       
|--------------------------------------- | ----- | ------- | ------ | --------- | ------- | ------
|SEPTEMBER 30, 2002                      | GAFRI | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS  
|                                        |       |         |        |           |         |       
|Revenues:                               |       |         |        |           |         |       
|Life, accident and health premiums      | $  -  | $  -    | $ -    | $ 81.0    | $  -    | $ 81.0
|Net investment income and other revenue | 4.9   | -       | -      | 140.8     | (5.0)   | 140.7 
|Interest income on AAG Holding notes    | -     | -       | 3.5    | -         | (3.5)   | -     
|Equity in earnings of subsidiaries      | (1.5) | 7.0     | -      | -         | (5.5)   | -     
|                                        | 3.4   | 7.0     | 3.5    | 221.8     | (14.0)  | 221.7 
|                                        |       |         |        |           |         |       
|Costs and Expenses:                     |       |         |        |           |         |       
|Insurance benefits and expenses         | -     | -       | -      | 169.4     | -       | 169.4 
|Interest expense on AAG Holding notes   | -     | 3.5     | -      | -         | (3.5)   | -     
|Other interest and debt expenses        | 0.1   | 5.1     | -      | -         | 0.7     | 5.9   
|Other expenses                          | 2.2   | 2.5     | -      | 42.8      | (2.2)   | 45.3  
|                                        | 2.3   | 11.1    | -      | 212.2     | (5.0)   | 220.6 
|                                        |       |         |        |           |         |       
|Earnings (loss) before income taxes     | 1.1   | (4.1)   | 3.5    | 9.6       | (9.0)   | 1.1   
|Provision (credit) for income taxes     | (0.9) | (1.6)   | -      | 1.8       | (0.2)   | (0.9) 
|                                        |       |         |        |           |         |       
|Net income (loss)                       | $ 2.0 | ($ 2.5) | $3.5   | $  7.8    | ($ 8.8) | $  2.0







|FOR THE NINE MONTHS ENDED               |        |       |       |        |          |       
|--------------------------------------- | ------ | ----- | ----- | ------ | -------- | ------
|SEPTEMBER 30, 2002                      |        |       |       |        |          |       
|                                        |        |       |       |        |          |       
|Revenues:                               |        |       |       |        |          |       
|Life, accident and health premiums      | $  -   | $  -  | $  -  | $224.6 | $   -    | $224.6
|Net investment income and other revenue | 16.6   | -     | -     | 412.6  | (14.3)   | 414.9 
|Interest income on AAG Holding notes    | -      | -     | 10.5  | -      | (10.5)   | -     
|Equity in earnings of subsidiaries      | 12.6   | 38.9  | -     | -      | (51.5)   | -     
|                                        | 29.2   | 38.9  | 10.5  | 637.2  | (76.3)   | 639.5 
|                                        |        |       |       |        |          |       
|Costs and Expenses:                     |        |       |       |        |          |       
|Insurance benefits and expenses         | -      | -     | -     | 481.2  | -        | 481.2 
|Interest expense on AAG Holding notes   | -      | 10.5  | -     | -      | (10.5)   | -     
|Other interest and debt expenses        | 0.1    | 15.3  | -     | -      | 2.4      | 17.8  
|Other expenses                          | 6.7    | 7.1   | -     | 110.6  | (6.3)    | 118.1 
|                                        | 6.8    | 32.9  | -     | 591.8  | (14.4)   | 617.1 
|                                        |        |       |       |        |          |       
|Earnings before income taxes            | 22.4   | 6.0   | 10.5  | 45.4   | (61.9)   | 22.4  
|Provision for income taxes              | 1.1    | 1.6   | -     | 11.4   | (13.0)   | 1.1   
|                                        |        |       |       |        |          |       
|Income before accounting change         | 21.3   | 4.4   | 10.5  | 34.0   | (48.9)   | 21.3  
|                                        |        |       |       |        |          |       
|Accounting change, net                  | (17.7) | -     | -     | (17.7) | 17.7     | (17.7)
|                                        |        |       |       |        |          |       
|Net income                              | $ 3.6  | $ 4.4 | $10.5 | $ 16.3 | ($ 31.2) | $  3.6
|                                        |        |       |       |        |          |       







GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In millions)





|FOR THE NINE MONTHS ENDED                                     |        | AAG     | CONS   | ALL OTHER | CONS    |          
|------------------------------------------------------------- | ------ | ------- | ------ | --------- | ------- | ---------
|SEPTEMBER 30, 2003                                            | GAFRI  | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS     
|                                                              |        |         |        |           |         |          
|Cash Flows from Operating Activities:                         |        |         |        |           |         |          
|Net income                                                    | $35.2  | $21.1   | $10.5  | $   49.5  | ($81.1) | $   35.2 
|Adjustments:                                                  |        |         |        |           |         |          
|Equity in net earnings of
      subsidiaries and affiliates   | (29.4) | (42.4)  | -      | -         | 71.8    | -        
|Increase in life, accident and health
      reserves          | -      | -       | -      | 62.5      | -       | 62.5     
|Benefits to annuity policyholders                             | -      | -       | -      | 227.2     | -       | 227.2    
|Amortization of insurance acquisition
      costs             | -      | -       | -      | 87.0      | -       | 87.0     
|Depreciation and amortization                                 | -      | 2.6     | -      | 12.0      | -       | 14.6     
|Realized losses on investments                                | 0.1    | -       | -      | 11.1      | -       | 11.2     
|Increase in insurance acquisition
      costs                 | -      | -       | -      | (118.8)   | -       | (118.8)  
|Decrease (increase) in other assets                           | 5.5    | -       | -      | (19.3)    | -       | (13.8)   
|Decrease in other liabilities                                 | (5.9)  | -       | -      | (26.4)    | -       | (32.3)   
|Increase payable to affiliates, net                           | 3.4    | -       | -      | 29.6      | -       | 33.0     
|Capital contribution from parent (to
      subsidiary)        | (95.6) | 58.4    | -      | 37.2      | -       | -        
|Dividends from subsidiaries(to parent)                        | 28.0   | (15.7)  | -      | (12.3)    | -       | -        
|Other, net                                                    | 0.1    | 14.6    | -      | (3.0)     | (1.2)   | 10.5     
|                                                              | (58.6) | 38.6    | 10.5   | 336.3     | (10.5)  | 316.3    
|                                                              |        |         |        |           |         |          
|Cash Flows from Investing Activities:                         |        |         |        |           |         |          
|Purchases of investments and other 
    assets                | -      | -       | -      | (4,078.4) | -       | (4,078.4)
|Maturities and redemptions of fixed 
    maturity investments | -      | -       | -      | 952.7     | -       | 952.7    
|Sales of investments and other assets                         | 1.2    | -       | -      | 2,708.4   | -       | 2,709.6  
|Decrease in policy loans                                      | -      | -       | -      | (0.4)     | -       | (0.4)    
|                                                              | 1.2    | -       | -      | (417.7)   | -       | (416.5)  
|                                                              |        |         |        |           |         |          
|Cash Flows from Financing Activities:                         |        |         |        |           |         |          
|Fixed annuity receipts                                        | -      | -       | -      | 592.8     | -       | 592.8    
|Annuity surrenders, benefits and
    withdrawals              | -      | -       | -      | (417.6)   | -       | (417.6)  
|Net transfers from variable annuity
    assets                | -      | -       | -      | 4.1       | -       | 4.1      
|Additions to notes payable                                    | -      | 8.0     | -      | -         | -       | 8.0      
|Reductions of notes payable                                   | (0.2)  | (66.0)  | -      | -         | -       | (66.2)   
|Issuance of Common Stock                                      | 62.7   | -       | -      | -         | -       | 62.7     
|Retirement of Common Stock                                    | (0.5)  | -       | -      | -         | -       | (0.5)    
|Trust dividend requirements                                   | -      | -       | (10.5) | -         | 10.5    | -        
|Issuance of Trust Preferred Securities                        | -      | 19.4    | -      | -         | -       | 19.4     
|                                                              | 62.0   | (38.6)  | (10.5) | 179.3     | 10.5    | 202.7    
|                                                              |        |         |        |           |         |          
|Net increase in cash and short-term   investments             | 4.6    | -       | -      | 97.9      | -       | 102.5    
|Beginning cash and short-term investments                     | 1.9    | -       | -      | 400.3     | -       | 402.2    
|                                                              |        |         |        |           |         |          
|Ending cash and short-term investments                        | $ 6.5  | $  -    | $  -   | $  498.2  | $  -    | $  504.7 





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In millions)





|FOR THE NINE MONTHS ENDED                                     |        | AAG     | TOTAL  | ALL OTHER | CONS    |          
|------------------------------------------------------------- | ------ | ------- | ------ | --------- | ------- | ---------
|SEPTEMBER 30, 2002                                            | GAFRI  | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS     
|                                                              |        |         |        |           |         |          
|Cash Flows from Operating Activities:                         |        |         |        |           |         |          
|Net income                                                    | $ 3.6  | $ 4.4   | $10.5  | $   16.3  | ($31.2) | $    3.6 
|Adjustments:                                                  |        |         |        |           |         |          
|Cumulative effect of accounting change                        | 17.7   | -       | -      | 17.7      | (17.7)  | 17.7     
|Equity in net earnings of
      subsidiaries and affiliates   | (11.7) | (26.9)  | -      | -         | 38.6    | -        
|Increase in life, accident and health
      reserves          | -      | -       | -      | 64.0      | -       | 64.0     
|Benefits to annuity policyholders                             | -      | -       | -      | 215.2     | -       | 215.2    
|Amortization of insurance acquisition
      costs             | -      | -       | -      | 81.1      | -       | 81.1     
|Depreciation and amortization                                 | 0.1    | 0.2     | -      | 19.6      | -       | 19.9     
|Realized losses (gains) on investments                        | (0.3)  | -       | -      | 51.9      | -       | 51.6     
|Increase in insurance acquisition
      costs                 | -      | -       | -      | (121.2)   | -       | (121.2)  
|Increase in other assets                                      | 2.3    | -       | -      | (40.2)    | -       | (37.9)   
|Decrease in other liabilities                                 | (2.4)  | -       | -      | (8.2)     | -       | (10.6)   
|Decrease in payable to affiliates, net                        | (3.7)  | -       | -      | (28.6)    | -       | (32.3)   
|Capital contribution from parent (to
      subsidiary)        | (41.3) | 41.3    | -      | -         | -       | -        
|Dividends from subsidiaries (to parent)                       | 35.4   | (12.4)  | -      | (23.0)    | -       | -        
|Other, net                                                    | -      | (6.6)   | -      | 12.7      | (0.2)   | 5.9      
|                                                              | (0.3)  | -       | 10.5   | 257.3     | (10.5)  | 257.0    
|                                                              |        |         |        |           |         |          
|Cash Flows from Investing Activities:                         |        |         |        |           |         |          
|Purchases of investments and other 
    assets                | -      | -       | -      | (2,233.6) | -       | (2,233.6)
|Purchase of subsidiary                                        | -      | -       | -      | (43.9)    |         | (43.9)   
|Maturities and redemptions of fixed 
    maturity investments | 6.4    | -       | -      | 880.8     | -       | 887.2    
|Sales of investments and other assets                         | 2.3    | -       | -      | 1,121.6   | -       | 1,123.9  
|Decrease in policy loans                                      | -      | -       | -      | 4.4       | -       | 4.4      
|                                                              | 8.7    | -       | -      | (270.7)   | -       | (262.0)  
|                                                              |        |         |        |           |         |          
|Cash Flows from Financing Activities:                         |        |         |        |           |         |          
|Fixed annuity receipts                                        | -      | -       | -      | 599.2     | -       | 599.2    
|Annuity surrenders, benefits and
    withdrawals              | -      | -       | -      | (410.6)   | -       | (410.6)  
|Net transfers to variable annuity
    assets                  | -      | -       | -      | 12.3      | -       | 12.3     
|Reductions of notes payable                                   | (0.2)  | -       | -      | -         | -       | (0.2)    
|Issuance of Common Stock                                      | 1.9    | -       | -      | -         | -       | 1.9      
|Retirement of Common Stock                                    | (1.6)  | -       | -      | -         | -       | (1.6)    
|Trust dividend requirements                                   | -      | -       | (10.5) | -         | 10.5    | -        
|                                                              | 0.1    | -       | (10.5) | 200.9     | 10.5    | 201.0    
|                                                              |        |         |        |           |         |          
|Net increase (decrease) in cash and 
  short-term investments | 8.5    | -       | -      | 187.5     | -       | 196.0    
|Beginning cash and short-term investments                     | 0.9    | -       | -      | 170.0     | -       | 170.9    
|                                                              |        |         |        |           |         |          
|Ending cash and short-term investments                        | $ 9.4  | $  -    | $  -   | $  357.5  | $  -    | $  366.9 





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



1. Subsequent Event

In November 2003, AAG Holding raised approximately $109 million through the sale of $112.5 million principal amount of senior debentures.  The debentures carry a stated coupon rate of 7-1/2%, mature in 2033, and are non-callable for five years.  The offering was made under the Company's effective shelf registration statement filed with the Securities and Exchange Commission covering the issuance of up to $250 million of various securities of the Company.  Approximately $91 million of the net proceeds was used to pay down all outstanding borrowings under the Company's bank credit agreement.  The remaining proceeds will be used for general corporate purposes.

The underwriters may purchase an additional $2.5 million principal amount of debentures at the public offering price less the underwriting commission until November 30, 2003 to cover additional overallotments, if any.











GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



ITEM 2



Management's Discussion and Analysis

of Financial Condition and Results of Operations

GENERAL

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

Forward-Looking Statements

Actual results could differ materially from those contained in or implied by such forward-looking statements for a variety of factors including:

- changes in economic conditions, including interest rates, performance of securities markets, and the availability of capital;
- trends in mortality and morbidity;
- regulatory actions;
- changes in regulatory and legal environment;
- tax law changes;
- availability of reinsurance and ability of reinsurers to pay their obligations;
- competitive pressures; and
- changes in debt and claims paying ratings

Forward-looking statements included in this Form 10-Q are made only as of the date of this report and under Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934; we do not have any obligation to update any forward-looking statements to reflect subsequent events or circumstances.

Critical Accounting Policies









GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

LIQUIDITY AND CAPITAL RESOURCES

Ratios

The National Association of Insurance Commissioners' ("NAIC") risk-based capital ("RBC") formula determines 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, 2003, the capital ratio of GAFRI's principal insurance subsidiary was 5.9 times its authorized control level RBC.

Sources and Uses of Funds

The Company has an unsecured credit agreement with a group of banks under which it can borrow up to $155 million until December 31, 2004.  In May 2003, the proceeds raised from the issuance of subsidiary trust preferred securities was used to pay down bank debt.  See Note H - "Mandatorily Redeemable Preferred Securities of Consolidated Subsidiary Trusts."

In September 2003, the Company raised approximately $60 million through a common stock rights offering.  GAFRI used $30 million of the proceeds to pay down outstanding borrowings under its bank line, and contributed $25 million to GALIC.  Approximately $5 million remained at the parent company for general corporate purposes.

At September 30, 2003, GAFRI had a $250 million shelf registration in effect under which it could issue stock or debt through one or more public offerings.  In November 2003, the Company raised approximately $109 million through the issuance of 7-1/2% Senior Debentures maturing in 2033.  The majority of the proceeds from this issuance were used to repay the remaining amounts borrowed under the Company's bank credit line.  See Note M - "Subsequent Event."

In recent years, the Company has entered into several reinsurance transactions in connection with certain of its life and supplemental health operations.  These transactions provided additional capital and liquidity and were entered into in the normal course of business in order to exit certain lines, fund an acquisition and transfer risk.  The Company may enter into additional reinsurance transactions in the future.

GAFRI believes that it has sufficient resources to meet its liquidity requirements.

Independent Ratings





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued



(good financial security) by Moody's.  Such ratings are generally based on items of

concern to policyholders and agents and are not directed toward the protection of investors.

Following are the Company's ratings as of September 30, 2003:



| |       |                |             | Standard   
| | ----- | -------------- | ----------- | -----------
| |       | A.M. Best      | Fitch       | & Poor's   
| | GALIC | A  (Excellent) | A+ (Strong) | A- (Strong)
| | AILIC | A  (Excellent) | A+ (Strong) | A- (Strong)
| | Loyal | A  (Excellent) | A+ (Strong) | Not rated  
| | UTA   | A- (Excellent) | Not rated   | Not rated  
| | GAPR  | A  (Excellent) | Not rated   | Not rated  

All of the above ratings carry a "stable" outlook.  In evaluating a company, independent rating agencies review such factors as the company's: (i) capital adequacy; (ii) profitability; (iii) leverage and liquidity; (iv) book of business; (v) quality and estimated market value of assets; (vi) adequacy of policy reserves; (vii) experience and competency of management and (viii) operating profile.

Management believes that the ratings assigned by independent insurance rating agencies are important because potential policyholders often use a company's rating as an initial screening device in considering annuity products.  Management believes that (i) a rating of "A" by A.M. Best (its third highest rating) is necessary to successfully market tax-deferred annuities to public education employees and other not-for-profit groups and (ii) a rating in the "A" category by at least one rating agency is necessary to successfully compete in other annuity markets.

GAFRI's insurance entities also compete in markets other than the sale of tax-deferred annuities.  Ratings are an important competitive factor; management believes that these entities can successfully compete in these markets with their respective ratings.

GAFRI's operations could be materially and adversely affected by downgrades.  In connection with recent reviews by independent rating agencies, management indicated that it intends to maintain lower ratios of debt to capital and intends to maintain the capital of its significant insurance subsidiaries at levels currently indicated by the rating agencies as appropriate for the current ratings.  Items which could adversely affect capital levels include (i) a sustained decrease in the stock market; (ii) a significant period of low interest rates and a resulting significant narrowing of annuity "spread" (the difference between earnings received by the Company on its investments less amount credited to policyholders' annuity accounts); (iii) investment impairments; (iv) adverse mortality, and (v) higher than planned dividends paid due to liquidity needs by GAFRI and AAG Holding.

2002 Acquisition

Investments

The NAIC assigns quality ratings to publicly traded as well as privately placed securities.  At September 30, 2003, 94% of GAFRI's fixed maturity portfolio was





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued



comprised of investment grade bonds (NAIC rating of "1" or "2").  Management believes that a high quality investment portfolio is more likely to generate a stable and predictable investment return.



At September 30, 2003, GAFRI's mortgage-backed securities ("MBSs") portfolio represented less than one-third of its fixed maturity investments.  MBSs are subject to significant prepayment risk due to the fact that, in periods of declining interest rates, mortgages may be repaid more rapidly than scheduled as borrowers refinance higher rate mortgages to take advantage of the lower current rates.  Due to the significant decline in the general level of interest rates in 2002, GAFRI experienced an increase in the level of prepayments on its MBSs; these prepayments have not been reinvested at interest rates comparable to the rates earned on the prepaid MBSs.  Partly as a result of this, the overall yield on GAFRI's fixed maturity portfolio dropped from 7.7% at January 1, 2002 to 7.0% at December 31, 2002 and 6.4% at October 31, 2003.

More than 95% of GAFRI's MBSs are rated "AAA" with substantially all being investment grade quality.  The market in which these securities trade is highly liquid.  Aside from interest rate risk referred to above, GAFRI does not believe a material risk (relative to earnings or liquidity) is inherent in holding such investments.

At September 30, 2003, GAFRI had pretax net unrealized gains of $359 million on fixed maturities and $30 million on equity securities.  Summarized information for the unrealized gains and losses recorded in GAFRI's balance sheet at September 30, 2003, is shown in the following table (dollars in millions).  Approximately $90 million of "Fixed Maturities" and $8 million of "Equity Securities" had no unrealized gains or losses at September 30, 2003.



|                                                       | Securities 
with 
Unrealized | Securities 
with 
Unrealized
|------------------------------------------------------ | ---------------------------- | ----------------------------
|                                                       | Gains                        | Losses                      
|Fixed maturities                                       |                              |                             
|Market value of securities                             | $6,189                       | $1,737                      
|Amortized cost of securities                           | $5,785                       | $1,782                      
|Gross unrealized gain or (loss)                        | $  404                       | ($   45)                    
|Market value as % of amortized cost                    | 107%                         | 97%                         
|Number of security positions                           | 1,306                        | 188                         
|Number individually exceeding $2 million gain or loss  | 10                           | 2                           
|Concentration of gains or (losses) by type or industry |                              |                             
|(exceeding 5% of unrealized):                          |                              |                             
|Mortgage-backed securities                             | $ 51.0                       | ($ 16.1)                    
|Banks and savings institutions                         | 42.5                         | -                           
|Electric services                                      | 39.3                         | (0.9)                       
|U.S. government and government agencies                | 24.6                         | (1.6)                       
|State and municipal                                    | 18.4                         | (2.5)                       
|Asset-backed securities                                | 12.9                         | (5.7)                       
|Natural gas transmission and distribution              | 9.9                          | (2.7)                       
|Air transportation (generally collateralized)          | 4.2                          | (7.0)                       
|Percentage rated investment grade                      | 95%                          | 91%                         



|Equity securities               |      |     
|------------------------------- | ---- | ----
|Market value of securities      | $64  | $4  
|Cost of securities              | $34  | $4  
|Gross unrealized gain or (loss) | $30  | $-  
|Market value as % of cost       | 188% | 100%





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

GAFRI's investment in equity securities of Provident Financial Group, a Cincinnati-based commercial banking and financial services company, represents $24 million of the $30 million in unrealized gains on equity securities at September 30, 2003.

The table below sets forth the scheduled maturities of fixed maturity securities at September 30, 2003, based on their market values.  Asset backed securities and other securities with sinking funds are reported at average maturity.  Actual maturities may differ from contractual maturities because certain securities may be called or prepaid by the issuers.



|                                   | Securities 
with 
Unrealized | Securities 
with 
Unrealized
|---------------------------------- | ---------------------------- | ----------------------------
|Maturity*                          | Gains*                       | Losses*                     
|One year or less                   | 3%                           | -%                          
|After one year through five years  | 21                           | 26                          
|After five years through ten years | 33                           | 8                           
|After ten years                    | 17                           | 9                           
|                                   | 74                           | 43                          
|Mortgage-backed securities         | 26                           | 57                          
|                                   | 100%                         | 100%                        



---

*Excludes $90 million of fixed maturities with no unrealized gains or losses.

GAFRI realized aggregate losses of $3.8 million during the first nine months of 2003 on $22.4 million in sales of fixed maturity securities (6 issues/issuers) that had individual unrealized losses greater than $500,000 at December 31, 2002.  Market values of four of the issues increased an aggregate of $3.2 million from December 31 to date of sale.  The market value of the remaining two securities decreased $316,000 from December 31 to the sale date.

Although GAFRI had the ability to continue holding these investments, its intent to hold them changed due primarily to deterioration in the issuers' creditworthiness, decisions to lessen exposure to a particular credit or industry, or to modify asset allocation within the portfolio.  None of the securities were sold out of a necessity to raise cash.  GAFRI has the ability and intent to hold securities with unrealized losses at September 30, 2003, for a period of time sufficient to allow for a recovery in market value.







GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued





The table below (dollars in millions) summarizes the unrealized gains and losses on all securities by dollar amount.

|                                              | Aggregate 
Market Value | Aggregate 
Unrealized Gain (Loss) | Market 
Value as 
% of Cost Basis
|--------------------------------------------- | ----------------------- | --------------------------------- | ---------------------------------
|Fixed Maturities at September 30, 2003        |                         |                                   |                                  
|                                              |                         |                                   |                                  
|Securities with unrealized gains at 9/30/03:  |                         |                                   |                                  
|Exceeding $500,000 (286 issues):              | $3,058                  | $267                              | $109.6%                          
|Less than $500,000 (1,020 issues):            | 3,131                   | 137                               | 104.6%                           
|                                              | $6,189                  | $404                              | 107.0%                           
|                                              |                         |                                   |                                  
|Securities with unrealized losses at 9/30/03: |                         |                                   |                                  
|Exceeding $500,000 (29 issues):               | $  553                  | ($ 30)                            | 94.9%                            
|Less than $500,000 (159 issues):              | 1,184                   | (15)                              | 98.7%                            
|                                              | $1,737                  | ($ 45)                            | 97.5%                            
|                                              |                         |                                   |                                  
|Equity Securities at September 30, 2003       |                         |                                   |                                  
|                                              |                         |                                   |                                  
|Securities with unrealized gains at 9/30/03:  |                         |                                   |                                  
|Exceeding $500,000 (3 issues):                | $53                     | $29                               | 220.8%                           
|Less than $500,000 (13 issues):               | 11                      | 1                                 | 110.0%                           
|                                              | $64                     | $30                               | 188.2%                           
|                                              |                         |                                   |                                  
|Securities with unrealized losses at 9/30/03: |                         |                                   |                                  
|Exceeding $500,000 (0 issues):                | $ -                     | $ -                               | -                                
|Less than $500,000 (3 issues):                | 4                       | -                                 | 100.0%                           
|                                              | $ 4                     | $ -                               | 100.0%                           
|                                              |                         |                                   |                                  





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

The following table (dollars in millions) summarizes the unrealized loss for all securities with unrealized losses by issuer quality and length of time those securities have been in an unrealized loss position.

|                                      |           |             | Market   
|------------------------------------- | --------- | ----------- | ---------
|                                      | Aggregate | Aggregate   | Value as 
|                                      | Market    | Unrealized  | % of Cost
|                                      | Value     | Gain (Loss) | Basis    
|                                      |           |             |          
|Fixed Maturities with Unrealized      |           |             |          
|Losses at September 30, 2003          |           |             |          
|                                      |           |             |          
|Investment grade with losses for:     |           |             |          
|Less than 6 months (93 issues)        | $1,431    | ($17)       | 98.8%    
|7 to 12 months (17 issues)            | 101       | (5)         | 95.3     
|Greater than 12 months (18 issues)    | 44        | (7)         | 86.3     
|                                      | $1,576    | ($29)       | 98.2%    
|                                      |           |             |          
|Non-investment grade with losses for: |           |             |          
|Less than 6 months (17 issues)        | $   55    | ($ 1)       | 98.2%    
|7 to 12 months (9 issues)             | 16        | (1)         | 94.1     
|Greater than 12 months (34 issues)    | 90        | (14)        | 86.5     
|                                      | $  161    | ($16)       | 91.0%    
|                                      |           |             |          
|                                      |           |             |          
|Equity Securities with Unrealized     |           |             |          
|Losses at September 30, 2003          |           |             |          
|                                      |           |             |          
|Less than 6 months (2 issues)         | $    4    | $ -         | 100.0%   
|7 to 12 months (0 issues)             | -         | -           | -        
|Greater than 12 months (1 issue)      | -         | -           | -        
|                                      | $    4    | $ -         | 100.0%   
|                                      |           |             |          
|                                      |           |             |          

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 (accounted for as a realized loss) and the cost basis of that investment is reduced.  The determination of whether unrealized losses are "other than temporary" requires judgment based on subjective as well as objective factors.  A listing of factors considered and resources used is contained in the discussion of "Investments" under Management's Discussion and Analysis in GAFRI's 2002 Form 10-K.

Based on its analysis of the factors enumerated above, management believes that (i) GAFRI will recover its cost basis in the securities with unrealized losses and (ii) GAFRI has the ability and intent to hold the securities until they mature or recover in value.  Should either of these beliefs change with regard to a particular security, a charge for impairment would likely be required.  While it is not possible to accurately predict if or when a specific security will become impaired, charges for other than temporary impairment could be material to results of operations in a future period.  While management believes it is not likely that future impairment charges will have a significant effect on GAFRI's liquidity, impairment charges could have an effect on the Company's ratings.







GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued



RESULTS OF OPERATIONS

General

Operating earnings before income taxes increased $28.2 million and $26.7 million in the third quarter and first nine months of 2003 compared to the comparable 2002 periods.  These results reflect significantly lower realized losses on investments and improved operating results in the Company's life, supplemental health and variable annuity operations, partially offset by the effects of lower interest rates on the Company's fixed annuity operations.  In the second quarter of 2003, GAFRI recorded a $12.5 million charge related to the narrowing of spreads in its fixed annuity operations and lower yields on fixed maturity securities.

While continued spread compression could result in further write-offs of DPAC, based on the current interest rate environment, GAFRI does not anticipate any additional material write-offs in the foreseeable future.

Retirement Products

|Three months ended                    | Nine months ended
|------------------------------------- | -----------------
|September 30,                         | September 30,    
|                                      | 2003             
|Annuity Premiums                      |                  
|Single premium fixed rate annuities   | $106             
|Flexible premium fixed rate annuities | 36               
|Single premium variable annuities     | 15               
|Flexible premium variable annuities   | 16               
|                                      | $173             

Fixed annuity sales decreased in the third quarter of 2003 compared to the same period in the prior year as the Company maintained its pricing targets and commission and interest crediting discipline during the recent period of historically low interest rates, as well as the Company's decision to suspend new sales of its equity-indexed annuities.

Variable annuity premiums decreased in the third quarter and first nine months of 2003 compared to the respective periods in the prior year as GAFRI continues to de-emphasize sales of variable annuities.











GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

Life, Accident and Health Premiums and Benefits

|Three months ended | Nine months ended              
|------------------ | -------------------------------
|September 30,      | September 30,                  
|                   | Premiums                       
|                   | Supplemental insurance products
|                   | GA Life of Puerto Rico         
|                   | Life products                  
|                   |                                
|                   | Benefits                       
|                   | Supplemental insurance products
|                   | GA Life of Puerto Rico         
|                   | Life products                  
|                   |                                

The increase in premiums and benefits for the supplemental insurance products represents the addition of new distribution sources.  The increase in supplemental insurance products benefits was primarily offset by favorable experience on the Medicare supplement products in 2003 compared to 2002.

Although results have improved in 2003, GAFRI continues to experience adverse mortality in GALIC's life division.  While stricter underwriting standards have resulted in higher quality business in 2003, these standards have led to a significant drop in first year premiums.  Further adverse mortality could result in a charge to income due to a further reduction in unamortized insurance acquisition costs.  See "Management's Discussion and Analysis - Insurance Acquisition Expenses."

Net Investment Income

Realized Gains (Losses) on Investments

Other Income







GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

Real Estate Operations

|Three months ended | Nine months ended
|------------------ | -----------------
|September 30,      | September 30,    
|                   | 2003             
|Other income       | $16.5            
|Other expenses     | 10.8             

Annuity Benefits

The majority of GAFRI's fixed rate annuity products permit GAFRI to change the crediting rate at any time, subject to minimum interest rate guarantees (as determined by applicable law).  Approximately 45% of GAFRI's annuity benefits accumulated relate to policies that have a minimum guarantee of 3%; the balance have a guarantee of 4%.  The Company has begun to seek and receive regulatory approvals to modify products to be issued in the future to include a 1.5% minimum crediting rate.  In states where required approvals have been received, the Company has begun issuing products with guaranteed minimum crediting rates of 1.5% beginning in the fourth quarter of 2003.  Historically, management has been able to react to changes in market interest rates and maintain a desired interest rate spread.  The recent interest rate environment has resulted in a spread compression.  Significant changes in projected investment yields could result in charges (or credits) to earnings in the period the projections are modified.

Insurance Acquisition Expenses

of the present value of future profits of businesses acquired amounting to $6.2 million in the first nine months of 2003 and $8.5 million in the first nine months of 2002.

Insurance acquisition expenses decreased by $3.7 million in the third quarter of 2003 compared to the same period in 2002, while increasing by $5.9 million in the first nine months of 2003 compared to the first nine months of 2002.

Lower insurance acquisition expenses in the third quarter of 2003 compared to the previous year are due primarily to a DPAC writeoff of $2.9 million in the third quarter of 2002 related to variable annuities resulting from the actual performance of the equity markets and a reduction of assumed future returns.





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued



The increase in insurance acquisition expenses in the first nine months of 2003 compared to the same period in 2002 is due primarily to an increase of in-force policies primarily in the annuities and supplemental insurance business.

The vast majority of GAFRI's DPAC asset relates to its fixed annuity, variable annuity and life insurance lines of business.  Continued spread compression, decreases in the stock market and adverse mortality could lead to write-offs of DPAC in the future.  However, absent significant deterioration in those factors, GAFRI does not anticipate any material write-offs in the foreseeable future.

Other Expenses

Income Taxes

Cumulative Effect of Accounting Change

Recent Accounting Standards

See Note B - "Accounting Policies - Mandatorily Redeemable Preferred Securities of Subsidiary Trusts" and Note H - "Mandatorily Redeemable Preferred Securities of Consolidated Subsidiary Trusts" for the effect of implementing FIN 46 with respect to GAFRI's trust preferred securities.

SOP 03-1, "Accounting and Reporting by Insurance Enterprises for Certain Non-traditional Long-Duration Contracts and Separate Accounts," was issued in July 2003 and is effective for fiscal years beginning after December 15, 2003, with earlier adoption encouraged.  SOP 03-1 provides additional accounting and reporting guidance for variable and fixed annuities.

When adopted, SOP 03-1 will be accounted for as a cumulative effect of a change in accounting principle.  If adopted in 2003, the adjustment would be recorded as of January 1, 2003, with restatement of previously reported 2003 results.

GAFRI's variable annuity contracts contain a guaranteed minimum death benefit ("GMDB") (which may exceed the value of the policyholder's account) to be paid if the annuityholder dies before the annuity payout period commences.





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued



Liabilities for any difference between the GMDB and the related account balance is borne by GAFRI and expensed when paid.  In periods of declining equity markets, the GMDB difference increases as the variable annuity account value decreases.  At September 30, 2003 and December 31, 2002, the aggregate GMDB values (assuming every policyholder died on those dates) exceeded the market value of the underlying variable annuities by $181 million and $233 million, respectively.  Industry practice varies, but GAFRI does not establish GAAP reserves for this mortality risk.  Under SOP 03-1, GAFRI would be required to record a liability for the present value of expected GMDB payments.  Initial recognition of a GAAP liability is estimated to be less than $5 million at September 30, 2003.  Death benefits paid in excess of the variable annuity account balance were about $1.1 million in both the first nine months of 2003 and in all of 2002.

The impact of SOP 03-1 on accounting for GAFRI's fixed annuities has not yet been determined.



Item 3



Quantitative and Qualitative Disclosure of Market Risk

Other than the effect that the interest rate environment in the first half of 2003 has had on GAFRI's investment portfolio (See Management's Discussion and Analysis, "Investments" and "Net Investment Income"), as of September 30, 2003, there were no material changes to the information provided in GAFRI's Form 10-K for 2002 under the caption "Exposure to Market Risk" in Management's Discussion and Analysis of Financial Condition and Results of Operations.



Item 4



Evaluation of Disclosure Controls and Procedures

GAFRI's Chief Executive Officer and Chief Financial Officer, with the participation of management, have evaluated GAFRI's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rule 13a-15) as of the end of the period covered by this report.  Based on the evaluation, they concluded that the controls and procedures are effective.  There have been no significant changes in GAFRI's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.







GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

PART II

OTHER INFORMATION



Item 6



Exhibits and Reports on Form 8-K







|Number | Exhibit Description                                                                                                                
|------ | -----------------------------------------------------------------------------------------------------------------------------------
|31(a)  | Certification of the Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.                         
|31(b)  | Certification of the Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.                         
|32     | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.







|Date of Report   | Items Reported                               
|---------------- | ---------------------------------------------
|July 31, 2003    | Second Quarter 2003 Earnings Release         
|October 20, 2003 | Third Quarter 2003 Earnings Release          
|November 3, 2003 | Press Release regarding GAFRI's Debt Offering













Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.

|                  |  | GREAT AMERICAN FINANCIAL RESOURCES, INC.
|----------------- |  | ----------------------------------------
|                  |  |                                         
|                  |  |                                         
|                  |  |                                         
|November 12, 2003 |  | BY:/s/Christopher P. Miliano            
|                  |  | Christopher P. Miliano                  
|                  |  | Chief Financial Officer