---



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
March 31, 2004 | 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 May 1, 2004, there were 47,084,703 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                                                                                                                                                         | 20  
|Item 3        | Quantitative and Qualitative Disclosure of Market Risk                                                                                                                            | 30  
|Item 4        | Evaluation of Disclosure Controls and Procedures                                                                                                                                  | 30  
|              |                                                                                                                                                                                   |     
|              |                                                                                                                                                                                   |     
|Part II       | Other Information                                                                                                                                                                 |     
|Item 6        | Exhibits and Reports on Form 8-K                                                                                                                                                  | 31  
|              | Signature                                                                                                                                                                         | 31  
|              |                                                                                                                                                                                   |     
|              |                                                                                                                                                                                   |     
|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 18 USC Section 1350 as adopted 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)

|                                                   |           |             
|-------------------------------------------------- | --------- | ------------
|                                                   |           |             
|                                                   | March 31, | December 31,
|                                                   | 2004      | 2003        
|Assets                                             |           |             
|Investments:                                       |           |             
|Fixed maturities:                                  |           |             
|Available-for-sale - at market                     |           |             
|(amortized cost - $7,623.5 and $7,568.3)           | $8,057.2  | $7,845.2    
|Trading securities - at market                     | 223.4     | 195.4       
|Equity securities - at market                      |           |             
|(cost - $59.1 and $45.9)                           | 107.4     | 83.4        
|Mortgage loans on real estate                      | 15.7      | 15.8        
|Real estate                                        | 78.4      | 79.4        
|Policy loans                                       | 214.9     | 215.6       
|Short-term investments                             | 133.3     | 143.4       
|Total investments                                  | 8,830.3   | 8,578.2     
|                                                   |           |             
|Cash                                               | 18.9      | 20.6        
|Accrued investment income                          | 100.2     | 100.5       
|Unamortized insurance acquisition costs, net       | 645.7     | 614.2       
|Other assets                                       | 327.3     | 312.4       
|Variable annuity assets (separate accounts)        | 587.4     | 568.4       
|                                                   |           |             
|                                                   | $10,509.8 | $10,194.3   
|                                                   |           |             
|Liabilities and Capital                            |           |             
|Annuity benefits accumulated                       | $ 7,104.7 | $6,974.6    
|Life, accident and health reserves                 | 1,033.9   | 1,018.9     
|Notes payable                                      | 300.2     | 214.0       
|Payable to subsidiary trusts (issuers of preferred |           |             
|securities)                                        | 62.8      | 155.0       
|Payable to affiliates, net                         | 99.0      | 94.2        
|Deferred taxes on unrealized gains                 | 128.5     | 84.2        
|Accounts payable, accrued expenses and other       |           |             
|liabilities                                        | 148.7     | 142.5       
|Variable annuity liabilities (separate accounts)   | 587.4     | 568.4       
|Total liabilities                                  | 9,465.2   | 9,251.8     
|                                                   |           |             
|Stockholders' Equity:                              |           |             
|Common Stock, $1 par value                         |           |             
|-100,000,000 shares authorized                     |           |             
|-47,052,760 and 46,978,151 shares outstanding      | 47.1      | 47.0        
|Capital surplus                                    | 407.0     | 406.0       
|Retained earnings                                  | 343.9     | 326.9       
|Unrealized gains on marketable securities, net     | 246.6     | 162.6       
|Total stockholders' equity                         | 1,044.6   | 942.5       
|                                                   |           |             
|                                                   | $10,509.8 | $10,194.3   
|                                                   |           |             





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                                
|--------------------------------------------------
|March 31,                                         
|                                                  
|Revenues:                                         
|Life, accident and health premiums                
|Net investment income                             
|Realized gains (losses) on:                       
|Investments                                       
|Retirement of subsidiary trust debt               
|Other income                                      
|                                                  
|Costs and Expenses:                               
|Annuity benefits                                  
|Life, accident and health benefits                
|Insurance acquisition expenses                    
|Interest on subsidiary trust obligations          
|Other interest and debt expenses                  
|Other expenses                                    
|                                                  
|                                                  
|Operating earnings before income taxes            
|Provision for income taxes                        
|                                                  
|Income before accounting change                   
|Cumulative effect of accounting change, net of tax
|                                                  
|Net Income                                        
|                                                  
|                                                  
|Basic earnings per common share:                  
|Income before accounting change                   
|Accounting change                                 
|Net income                                        
|                                                  
|Diluted earnings per common share:                
|Income before accounting change                   
|Accounting change                                 
|Net income                                        
|                                                  
|Average number of common shares:                  
|Basic                                             
|Diluted                                           
|                                                  





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(In millions)

|                                           | Three months ended
|------------------------------------------ | ------------------
|                                           | March 31,         
|                                           | 2004              
|Common Stock:                              |                   
|Balance at beginning of period             | $ 47.0            
|Common Stock issued                        | 0.1               
|Balance at end of period                   | $ 47.1            
|                                           |                   
|                                           |                   
|Capital Surplus:                           |                   
|Balance at beginning of period             | $406.0            
|Common Stock issued                        | 1.0               
|Common Stock retired                       | -                 
|Balance at end of period                   | $407.0            
|                                           |                   
|                                           |                   
|Retained Earnings:                         |                   
|Balance at beginning of period             | $326.9            
|Net income                                 | 17.0              
|Balance at end of period                   | $343.9            
|                                           |                   
|                                           |                   
|Unrealized Gains, Net:                     |                   
|Balance at beginning of period             | $162.6            
|Change during period                       | 84.0              
|Balance at end of period                   | $246.6            
|                                           |                   
|                                           |                   
|                                           |                   
|                                           |                   
|Comprehensive Income                       |                   
|Net income                                 | $ 17.0            
|Other comprehensive income - change in net |                   
|unrealized gains                           | 84.0              
|Comprehensive income                       | $101.0            
|                                           |                   





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(In millions)



|                                                         | Three months ended
|-------------------------------------------------------- | ------------------
|                                                         | March 31,         
|                                                         | 2004              
|Cash Flows from Operating Activities:                    |                   
|Net income                                               | $  17.0           
|Adjustments:                                             |                   
|Cumulative effect of accounting change                   | 2.2               
|Increase in life, accident and health reserves           | 17.0              
|Benefits to annuity policyholders                        | 72.3              
|Amortization of insurance acquisition costs              | 22.0              
|Depreciation and amortization                            | 5.1               
|Realized (gains) losses on investments                   | (8.8)             
|Increase in insurance acquisition costs                  | (30.8)            
|Increase in other assets                                 | (4.0)             
|Increase (decrease) in other liabilities                 | 2.3               
|Increase in payable to affiliates, net                   | 4.8               
|Other, net                                               | (20.0)            
|                                                         | 79.1              
|                                                         |                   
|Cash Flows from Investing Activities:                    |                   
|Purchases of and additional investments in:              |                   
|Fixed maturity investments                               | (956.6)           
|Equity securities                                        | (16.9)            
|Real estate, mortgage loans and other assets             | (0.7)             
|Maturities and redemptions of fixed maturity investments | 187.2             
|Sales of:                                                |                   
|Fixed maturity investments                               | 708.9             
|Equity securities                                        | 5.6               
|Real estate, mortgage loans and other assets             | 0.1               
|Decrease in policy loans                                 | 0.7               
|                                                         | (71.7)            
|                                                         |                   
|Cash Flows from Financing Activities:                    |                   
|Fixed annuity receipts                                   | 152.9             
|Annuity surrenders, benefits and withdrawals             | (159.4)           
|Net transfers (to) from variable annuity assets          | (3.7)             
|Additions to notes payable                               | 83.5              
|Reductions of notes payable                              | -                 
|Issuance of Common Stock                                 | 1.0               
|Retirement of Common Stock                               | -                 
|Repurchase of Trust Preferred Securities                 | (93.5)            
|                                                         | (19.2)            
|                                                         |                   
|Net decrease in cash and short-term investments          | (11.8)            
|Beginning cash and short-term investments                | 164.0             
|Ending cash and short-term investments                   | $ 152.2           
|                                                         |                   

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 supplemental insurance and life products 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 May 1, 2004.

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.

Accounting Change

Investments







GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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.

Derivatives

The terms of the interest rate swap match those of the hedged debt; therefore, the swap is considered to be (and is accounted for as) an effective fair value hedge.  Both the swap and the hedged debt are adjusted for changes in fair value by offsetting amounts.  Accordingly, since the swap is included with notes payable in the Balance Sheet, the only effect on GAFRI's financial statements is that the interest expense on the hedged debt is recorded based on the variable rate.

Reinsurance

GAFRI's insurance subsidiaries cede life insurance policies to a third party on a funds withheld basis whereby GAFRI retains the assets (securities) associated with the reinsurance contracts.  Interest is credited to the reinsurer based on the actual investment performance (including realized gains and losses) of the retained assets.  Effective October 1, 2003, the Company implemented SFAS No. 133 Implementation Issue B36 ("B36")"Embedded Derivatives in Reinsurance Contracts."  Under B36, these reinsurance contracts are considered to contain embedded derivatives (that must be marked to market) because the yield on the payables is based on specific blocks of the ceding companies' assets, rather than the overall creditworthiness of the ceding company.  GAFRI determined that changes in the fair value of the underlying portfolios of fixed maturity securities is an appropriate measure of the value of the embedded derivative.  As permitted under B36, the Company reclassified the securities related to these transactions from "available-for-sale" to "trading."  The mark to market on the embedded derivatives offsets the investment income recorded on the mark to market of the related trading portfolios.

Insurance Acquisition Costs and Expenses

Insurance acquisition expenses in the income statement reflect primarily the amortization of DPAC and PVFP.  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."







GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Deferred Policy Acquisition Costs ("DPAC")

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.

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 ("PVFP")

The PVFP is 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

Following the adoption of SOP 03-1, reserves for two-tier annuities (annuities with different stated account values depending on whether a policyholder





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



annuitizes, dies or surrenders) are now recorded at the lower-tier value plus an additional reserve for accrued persistency and premium bonuses and an additional reserve for excess benefits expected to be paid on future deaths and annuitizations ("EDAR") that require payment of the upper-tier value.  The liability for EDAR is accrued for and modified using assumptions consistent with those used in determining DPAC and DPAC amortization, except that accruals are in relation to the present value of total expected assessments.  Total expected assessments consist primarily of investment margin, surrender charges, and unearned revenues once they are recognized as income.

Prior to the adoption of the SOP, reserves for two-tier annuities were generally recorded at the lower-tier value plus an EDAR reserve.

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

Life, Accident and Health Reserves

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

Variable Annuity Assets and Liabilities

Variable annuity contracts contain a guaranteed minimum death benefit ("GMDB") to be paid if the policyholder dies before the annuity payout period commences.  In periods of declining equity markets, the GMDB may exceed the value of the policyholder's account.  A GMDB liability is established for future excess death benefits using assumptions together with a range of reasonably possible scenarios for investment fund performance that are consistent with DPAC capitalization and amortization assumptions.  Prior to the adoption of SOP 03-1, death benefits in excess of the variable annuity account balances were expensed when paid.

Life, Accident and Health Premiums and Benefits





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



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.

Payable to Subsidiary Trusts (Issuers of Preferred Securities)

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 AFG's consolidated tax group are aggregated with other amounts receivable from or payable to affiliates.

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 the fair values at grant dates consistent with the method prescribed by SFAS No. 123.





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued





For SFAS No. 123 purposes, the "fair value" of $4.56 per option granted in the first quarter of 2004 and $4.63 for the first quarter of 2003 was calculated using the Black-Scholes option pricing model and the following assumptions for both periods: dividend yield of less than 1%; expected volatility of 20%; risk-free interest rate of 3%; 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                        
| | ------------------------------------------
| | March 31,                                 
| |                                           
| | Net income, as reported                   
| | Pro forma stock option expense, net of tax
| |                                           
| | Adjusted net income                       
| |                                           
| | Earnings per share (as reported):         
| | Basic                                     
| | Diluted                                   
| |                                           
| | Earnings per share (adjusted):            
| | Basic                                     
| | Diluted                                   

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 are also 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

Statement of Cash Flows

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







GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued





C.	Segments of Operations

GAFRI's life and annuity operations offer fixed and variable annuity products and traditional life insurance products.  GAFRI's annuity products are sold through managing general agents and independent agents to employees of primary and secondary educational institutions, hospitals and in the non-qualified market.  Traditional term and universal life insurance products had been marketed through national marketing organizations.  In the second quarter of 2004, GAFRI will suspend new sales of these life insurance products due to inadequate volume and returns.  The Company will continue to service its in-force block of policies.  The Company will also continue to sell life products through its supplemental insurance operations and GA Life of Puerto Rico (see below).

GAFRI's supplemental insurance businesses (United Teacher Associates Insurance Company ("UTA") and Loyal American Life Insurance Company) offer a variety of policies to supplement primary health insurance and other insurance coverage.  UTA offers its products through independent agents.

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 approximately 20% of GAFRI's life, accident and health premiums in the first quarters of 2004 and 2003, respectively.

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
|----------------------------------- | ------------------
|                                    | March 31,         
|                                    | 2004              
|Revenues                            |                   
|Life and annuity products           | $141.8            
|Supplemental insurance products     | 72.7              
|GA Life of Puerto Rico              | 20.2              
|Corporate and other                 | 1.5               
|Total operating revenues            | 236.2             
|                                    |                   
|Realized gains (losses)             | 7.5               
|Total revenues per income statement | $243.7            
|                                    |                   



|                                         |        |       
|---------------------------------------- | ------ | ------
|Operating profit - pretax                |        |       
|Life and annuity products                | $ 20.5 | $ 21.4
|Supplemental insurance products          | 5.5    | 2.1   
|GA Life of Puerto Rico                   | 3.3    | 3.1   
|Corporate and other                      | (9.1)  | (7.3) 
|Pretax earnings from operations          | 20.2   | 19.3  
|                                         |        |       
|Realized gains (losses)                  | 7.5    | (8.3) 
|Total pretax income per income statement | $ 27.7 | $ 11.0





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



D.	Unamortized Insurance Acquisition Costs

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



|                                                  | March 31, | December 31,
|------------------------------------------------- | --------- | ------------
|                                                  | 2004      | 2003        
|                                                  |          
|Deferred policy acquisition costs ("DPAC")        | $694.5    | $671.1      
|Present value of future profits acquired ("PVFP") | 56.3      | 57.9        
|Unearned revenues                                 | (105.1)   | (114.8)     
|                                                  | $645.7    | $614.2      

Included in DPAC at March 31, 2004, is unamortized sales inducements of $56.6 million.  As a result of adopting SOP 03-1, unamortized insurance acquisition costs increased by $50 million due to required balance sheet reclasses.  The PVFP amounts in the table above are net of $67.4 million and $65.8 million of accumulated amortization at March 31, 2004 and December 31, 2003, respectively.  Amortization of the PVFP was $1.6 million and $2.2 million during the first three months of 2004 and 2003, respectively.  During each of the next five years, the PVFP is expected to decrease at a rate of approximately 14% of the balance at the beginning of each respective year.

E.	Notes Payable

Notes payable consisted of the following (in millions):



|                                                  | March 31, | December 31,
|------------------------------------------------- | --------- | ------------
|                                                  | 2004      | 2003        
|                                                  |          
|Direct obligations of GAFRI                       | $  1.4    | $  1.5      
|Obligations of AAG Holding (guaranteed by GAFRI): |           |             
|6-7/8% Senior Notes due 2008                      | 100.0     | 100.0       
|7-1/2% Senior Debentures due 2033                 | 112.5     | 112.5       
|7-1/4% Senior Debentures due 2034                 | 86.3      | -           
|Total                                             | $300.2    | $214.0      

AAG Holding has a floating rate $155 million unsecured credit agreement.  Loans under the credit agreement mature on December 31, 2004.  At March 31, 2004 and December 31, 2003, there were no borrowings outstanding under the agreement.

In the first quarter of 2004, the Company issued $86.3 million principal amount of 7-1/4%, 30 year Senior Debentures, using the proceeds to redeem its 9-1/4% trust preferred securities at face value and to repurchase a portion of its outstanding 8-7/8% preferred securities. (See Note F)

GAFRI has entered into interest rate swaps which effectively convert its 6-7/8% Senior Notes to a floating rate of 3-month LIBOR plus 2.9%.

At March 31, 2004, scheduled principal payments on debt for the remainder of 2004 and the subsequent five years were as follows (in millions):



|2004 | 2005 | 2006 | 2007 | 2008   | 2009
|---- | ---- | ---- | ---- | ------ | ----
|$0.2 | $0.2 | $0.2 | $0.1 | $100.1 | $0.1
|     |      |      |      |        |     





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



F.	Payable to Subsidiary Trusts (Issuers of Preferred Securities)

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.

In accordance with FIN 46, VIEs that issued preferred securities subsequent to January 31, 2003, are not consolidated for financial reporting purposes.  Beginning December 31, 2003, previously consolidated subsidiary trusts were deconsolidated for financial reporting purposes under FIN 46.  Accordingly, the subordinated debt due the trusts is shown as a liability in GAFRI's balance sheet instead of the preferred securities, which were previously reported as "Mandatorily redeemable preferred securities of subsidiary trusts."  The preferred securities supported by the payable to subsidiary trusts consisted of the following:



|Date of       |                       | Amount Outstanding | Optional   
|------------- | --------------------- | ------------------ | -----------
|Issuance      | Issue (Maturity Date) | 3/31/04            | 12/31/03   
|November 1996 | 9-1/4% TOPrS  (2026)  | -                  | $65,012,500
|March 1997    | 8-7/8% Pfd    (2027)  | $42,800,000        | 70,000,000 
|May 2003      | 7.35% Pfd     (2033)  | 20,000,000         | 20,000,000 

In 2003, a newly formed wholly-owned subsidiary trust of GAFRI issued $20 million of trust preferred securities maturing in 2033.

In the first quarter of 2004, GAFRI redeemed all of its 9-1/4% trust preferred securities at face value and repurchased $27.2 million principal amount of its 8-7/8% preferred securities for $28.5 million in cash.

G.	Stockholders' Equity

At March 31, 2004, there were 5.9 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 three months

ended March 31 included the following (in millions):



|                                                                   | 2004   | 2003   
|------------------------------------------------------------------ | ------ | -------
|                                                                   | Pretax | Taxes  
|Unrealized holding gains on
  securities arising during the period | $137.1 | ($47.4)
|Realized (gains) losses on securities                              | (8.8)  | 3.1    
|Change in net unrealized gains on
  marketable securities          | $128.3 | ($44.3)

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

H.	Earnings Per Share

The number of common shares outstanding used in calculating diluted earnings per share in the first quarter of 2004 includes 0.3 million shares compared to 0.1 million shares for the first quarter of 2003, for the effect of the assumed exercise of GAFRI's stock options.





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



I.	Contingencies

There have been no significant changes to the matters discussed and referred to in Note N "Contingencies" of GAFRI's Annual Report on Form 10-K for 2003.

J.	Additional Information

Statutory Information



|                              | March 31, | December 31,
|----------------------------- | --------- | ------------
|                              | 2004      | 2003        
|Capital and surplus           | $505.0    | $515.4      
|Asset valuation reserve       | 56.8      | 52.5        
|Interest maintenance reserve  | 24.6      | 21.5        
|                              |           |             
|Three months ended March 31, 
|                              | 2004      | 2003        
|Pretax income from operations | $21.8     | $11.4       
|Net income (loss)             | 16.7      | (13.1)      

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 these restrictions at December 31, 2003, GALIC and GAPR may pay $56.5 million and $32.9 million, respectively, in dividends in 2004 without prior approval.  In the first quarter of 2004, GALIC paid dividends of $23.0 million.  A portion of dividends from GAPR may be subject to federal income taxes.

Variable Annuities





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.  Condensed consolidating financial statements for GAFRI are as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

CONDENSED CONSOLIDATING BALANCE SHEET

(In millions)





|                                                     |          | AAG      | ALL OTHER | CONS       |          
|---------------------------------------------------- | -------- | -------- | --------- | ---------- | ---------
|MARCH 31, 2004                                       | GAFRI    | HOLDING  | SUBS      | ENTRIES    | CONS     
|                                                     |          |          |           |            |          
|Assets                                               |          |          |           |            |          
|Cash and investments                                 | $    3.6 | $    0.1 | $ 8,845.5 | $     -    | $ 8,849.2
|Investment in subsidiaries                           | 990.1    | 1,349.3  | 11.0      | (2,350.4)  | -        
|Notes receivable from AAG Holding                    | 104.4    | -        | -         | (104.4)    | -        
|Unamortized insurance acquisition 
    costs, net    | -        | -        | 645.7     | -          | 645.7    
|Other assets                                         | 18.7     | 8.5      | 356.5     | 43.8       | 427.5    
|Variable annuity assets 
    (separate accounts)     | -        | -        | 587.4     | -          | 587.4    
|                                                     | $1,116.8 | $1,357.9 | $10,446.1 | ($2,411.0) | $10,509.8
|                                                     |          |          |           |            |          
|Liabilities and Capital                              |          |          |           |            |          
|Insurance liabilities                                | $     -  | $     -  | $ 8,144.1 | ($    5.5) | $ 8,138.6
|Notes payable to GAFRI                               | -        | 102.4    | 1.9       | (104.3)    | -        
|Other notes payable                                  | 1.4      | 298.8    | -         | -          | 300.2    
|Payable to subsidiary trusts                         | -        | 97.9     | -         | (35.1)     | 62.8     
|Other liabilities                                    | 70.8     | 20.6     | 285.1     | (0.3)      | 376.2    
|Variable annuity liabilities
    (separate accounts) | -        | -        | 587.4     | -          | 587.4    
|                                                     | 72.2     | 519.7    | 9,018.5   | (145.2)    | 9,465.2  
|                                                     |          |          |           |            |          
|                                                     |          |          |           |            |          
|Total stockholders' equity                           | 1,044.6  | 838.2    | 1,427.6   | (2,265.8)  | 1,044.6  
|                                                     | $1,116.8 | $1,357.9 | $10,446.1 | ($2,411.0) | $10,509.8





|                                                     |          |          |           |            |          
|---------------------------------------------------- | -------- | -------- | --------- | ---------- | ---------
|DECEMBER 31, 2003                                    |          |          |           |            |          
|                                                     |          |          |           |            |          
|Assets                                               |          |          |           |            |          
|Cash and investments                                 | $    0.7 | $     -  | $8,599.3  | ($    1.2) | $8,598.8 
|Investment in subsidiaries                           | 893.7    | 1,273.1  | 15.1      | (2,181.9)  | -        
|Notes receivable from AAG Holding                    | 102.8    | -        | -         | (102.8)    | -        
|Unamortized insurance acquisition 
    costs, net    | -        | -        | 614.2     | -          | 614.2    
|Other assets                                         | 19.5     | 4.8      | 346.6     | 42.0       | 412.9    
|Variable annuity assets 
    (separate accounts)     | -        | -        | 568.4     | -          | 568.4    
|                                                     | $1,016.7 | $1,277.9 | $10,143.6 | ($2,243.9) | $10,194.3
|                                                     |          |          |           |            |          
|Liabilities and Capital                              |          |          |           |            |          
|Insurance liabilities                                | $     -  | $     -  | $7,999.2  | ($    5.7) | $7,993.5 
|Notes payable to GAFRI                               | -        | 102.4    | 0.4       | (102.8)    | -        
|Other notes payable                                  | 1.5      | 212.5    | -         | -          | 214.0    
|Payable to subsidiary trusts                         | -        | 175.3    | -         | (20.3)     | 155.0    
|Other liabilities                                    | 72.7     | 18.3     | 232.7     | (2.8)      | 320.9    
|Variable annuity liabilities
    (separate accounts) | -        | -        | 568.4     | -          | 568.4    
|                                                     | 74.2     | 508.5    | 8,800.7   | (131.6)    | 9,251.8  
|                                                     |          |          |           |            |          
|Total stockholders' equity                           | 942.5    | 769.4    | 1,342.9   | (2,112.3)  | 942.5    
|                                                     | $1,016.7 | $1,277.9 | $10,143.6 | ($2,243.9) | $10,194.3
|                                                     |          |          |           |            |          





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    |       
|--------------------------------------- | ----- | ------- | ------ | --------- | ------- | ------
|MARCH 31, 2004                          | GAFRI | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS  
|                                        |       |         |        |           |         |       
|Revenues:                               |       |         |        |           |         |       
|Life, accident and health premiums      | $  -  | $  -    | $  -   | $ 90.3    | $  -    | $ 90.3
|Net investment income and other revenue | 4.6   | -       | -      | 152.2     | (3.4)   | 153.4 
|Equity in earnings of subsidiaries      | 24.8  | 33.9    | -      | -         | (58.7)  | -     
|                                        | 29.4  | 33.9    | -      | 242.5     | (62.1)  | 243.7 
|                                        |       |         |        |           |         |       
|Costs and Expenses:                     |       |         |        |           |         |       
|Insurance benefits and expenses         | -     | -       | -      | 171.7     | -       | 171.7 
|Interest and debt expenses              | -     | 10.8    | -      | -         | (3.0)   | 7.8   
|Other expenses                          | 1.7   | 1.6     | -      | 33.2      | -       | 36.5  
|                                        | 1.7   | 12.4    | -      | 204.9     | (3.0)   | 216.0 
|                                        |       |         |        |           |         |       
|Earnings before income taxes            | 27.7  | 21.5    | -      | 37.6      | (59.1)  | 27.7  
|Provision for income taxes              | 8.5   | 7.2     | -      | 11.7      | (18.9)  | 8.5   
|                                        |       |         |        |           |         |       
|Income before accounting change         | 19.2  | 14.3    | -      | 25.9      | (40.2)  | 19.2  
|                                        |       |         |        |           |         |       
|Accounting change, net                  | (2.2) | -       | -      | (2.2)     | 2.2     | (2.2) 
|                                        |       |         |        |           |         |       
|Net income                              | $17.0 | $14.3   | $  -   | $ 23.7    | ($38.0) | $ 17.0





|                                        |       |       |      |        |         |       
|--------------------------------------- | ----- | ----- | ---- | ------ | ------- | ------
|FOR THE THREE MONTHS ENDED              |       |       |      |        |         |       
|MARCH 31, 2003                          |       |       |      |        |         |       
|                                        |       |       |      |        |         |       
|Revenues:                               |       |       |      |        |         |       
|Life, accident and health premiums      | $  -  | $  -  | $ -  | $ 79.5 | $  -    | $ 79.5
|Net investment income and other revenue | 5.1   | -     | -    | 136.9  | (3.2)   | 138.8 
|Interest income on AAG Holding notes    | -     | -     | 3.5  | -      | (3.5)   | -     
|Equity in earnings of subsidiaries      | 7.4   | 15.4  | -    | -      | (22.8)  | -     
|                                        | 12.5  | 15.4  | 3.5  | 216.4  | (29.5)  | 218.3 
|                                        |       |       |      |        |         |       
|Costs and Expenses:                     |       |       |      |        |         |       
|Insurance benefits and expenses         | -     | -     | -    | 164.2  | -       | 164.2 
|Interest expense on AAG Holding notes   | -     | 3.5   | -    | -      | (3.5)   | -     
|Other interest and debt expenses        | -     | 5.1   | -    | -      | 0.8     | 5.9   
|Other expenses                          | 1.5   | 1.8   | -    | 34.5   | (0.6)   | 37.2  
|                                        | 1.5   | 10.4  | -    | 198.7  | (3.3)   | 207.3 
|                                        |       |       |      |        |         |       
|Earnings before income taxes            | 11.0  | 5.0   | 3.5  | 17.7   | (26.2)  | 11.0  
|Provision for income taxes              | 2.7   | 1.6   | -    | 4.8    | (6.4)   | 2.7   
|                                        |       |       |      |        |         |       
|Net income                              | $ 8.3 | $ 3.4 | $3.5 | $ 12.9 | ($19.8) | $  8.3
|                                        |       |       |      |        |         |       





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In millions)





|FOR THE THREE MONTHS ENDED                                    |        | AAG     | ALL OTHER | CONS    |        
|------------------------------------------------------------- | ------ | ------- | --------- | ------- | -------
|MARCH 31, 2004                                                | GAFRI  | HOLDING | SUBS      | ENTRIES | CONS   
|                                                              |        |         |           |         |        
|Cash Flows from Operating Activities:                         |        |         |           |         |        
|Net income                                                    | $17.0  | $14.3   | $ 23.7    | ($38.0) | $ 17.0 
|Adjustments:                                                  |        |         |           |         |        
|Cumulative effect of accounting change                        | 2.2    | -       | 2.2       | (2.2)   | 2.2    
|Equity in net earnings of
      subsidiaries and affiliates   | (15.2) | (22.6)  | -         | 37.8    | -      
|Increase in life, accident and health
      reserves          | -      | -       | 17.0      | -       | 17.0   
|Benefits to annuity policyholders                             | -      | -       | 72.3      | -       | 72.3   
|Amortization of insurance acquisition
      costs             | -      | -       | 22.0      | -       | 22.0   
|Depreciation and amortization                                 | -      | 0.7     | 4.4       | -       | 5.1    
|Realized gains on investments                                 | (0.3)  | -       | (8.5)     | -       | (8.8)  
|Increase in insurance acquisition
      costs                 | -      | -       | (30.8)    | -       | (30.8) 
|Decrease (increase) in other assets                           | 0.1    | -       | (4.1)     | -       | (4.0)  
|Increase (decrease) in other liabilities                      | (2.7)  | -       | 5.0       | -       | 2.3    
|Increase in payable to affiliates, net                        | 0.8    | -       | 4.0       | -       | 4.8    
|Capital contribution from parent (to
      subsidiary)        | (90.3) | 90.3    | -         | -       | -      
|Dividends from subsidiaries(to parent)                        | 114.2  | (91.2)  | (23.0)    | -       | -      
|Other, net                                                    | (1.4)  | 0.1     | (21.1)    | 2.4     | (20.0) 
|                                                              | 24.4   | (8.4)   | 63.1      | -       | 79.1   
|                                                              |        |         |           |         |        
|Cash Flows from Investing Activities:                         |        |         |           |         |        
|Purchases of investments and other assets                     | (23.2) | -       | (979.5)   | 28.5    | (974.2)
|Maturities and redemptions of fixed 
    maturity investments | -      | -       | 187.2     | -       | 187.2  
|Sales of investments and other assets                         | 1.0    | -       | 723.6     | (10.0)  | 714.6  
|Decrease in policy loans                                      | -      | -       | 0.7       | -       | 0.7    
|                                                              | (22.2) | -       | (68.0)    | 18.5    | (71.7) 
|                                                              |        |         |           |         |        
|Cash Flows from Financing Activities:                         |        |         |           |         |        
|Fixed annuity receipts                                        | -      | -       | 152.9     | -       | 152.9  
|Annuity surrenders, benefits and
    withdrawals              | -      | -       | (159.4)   | -       | (159.4)
|Net transfers to variable annuity
    assets                  | -      | -       | (3.7)     | -       | (3.7)  
|Additions to notes payable                                    | -      | 83.5    | -         | -       | 83.5   
|Issuance of Common Stock                                      | 1.0    | -       | -         | -       | 1.0    
|Repurchase of Trust Preferred Securities                      | -      | (75.0)  | -         | (18.5)  | (93.5) 
|                                                              | 1.0    | 8.5     | (10.2)    | (18.5)  | (19.2) 
|                                                              |        |         |           |         |        
|Net increase (decrease) in cash and 
  short-term investments | 3.2    | 0.1     | (15.1)    | -       | (11.8) 
|Beginning cash and short-term investments                     | 0.4    | -       | 163.6     | -       | 164.0  
|                                                              |        |         |           |         |        
|Ending cash and short-term investments                        | $ 3.6  | $ 0.1   | $148.5    | $  -    | $152.2 





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In millions)





|FOR THE THREE MONTHS ENDED                                    |        | AAG     | CONS   | ALL OTHER | CONS    |          
|------------------------------------------------------------- | ------ | ------- | ------ | --------- | ------- | ---------
|March 31, 2003                                                | GAFRI  | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS     
|                                                              |        |         |        |           |         |          
|Cash Flows from Operating Activities:                         |        |         |        |           |         |          
|Net income                                                    | $ 8.3  | $ 3.4   | $3.5   | $   12.9  | ($19.8) | $    8.3 
|Adjustments:                                                  |        |         |        |           |         |          
|Equity in net earnings of
      subsidiaries and affiliates   | (6.0)  | (10.4)  | -      | -         | 16.4    | -        
|Increase in life, accident and health
      reserves          | -      | -       | -      | 31.9      | -       | 31.9     
|Benefits to annuity policyholders                             | -      | -       | -      | 74.8      | -       | 74.8     
|Amortization of insurance acquisition
      costs             | -      | -       | -      | 27.3      | -       | 27.3     
|Depreciation and amortization                                 | -      | 0.1     | -      | 1.0       | -       | 1.1      
|Realized losses on investments                                | 0.2    | -       | -      | 8.1       | -       | 8.3      
|Increase in insurance acquisition
      costs                 | -      | -       | -      | (44.7)    | -       | (44.7)   
|Decrease (increase) in other assets                           | 1.2    | -       | -      | (20.9)    | -       | (19.7)   
|Decrease in other liabilities                                 | (5.5)  | -       | -      | (6.3)     | -       | (11.8)   
|Increase in payable to affiliates, net                        | 2.3    | -       | -      | 0.2       | -       | 2.5      
|Capital contribution from parent (to
      subsidiary)        | (11.8) | 11.8    | -      | -         | -       | -        
|Dividends from subsidiaries (to parent)                       | 11.2   | (9.9)   | -      | (1.3)     | -       | -        
|Other, net                                                    | -      | 5.0     | -      | (5.7)     | (0.1)   | (0.8)    
|                                                              | (0.1)  | -       | 3.5    | 77.3      | (3.5)   | 77.2     
|                                                              |        |         |        |           |         |          
|Cash Flows from Investing Activities:                         |        |         |        |           |         |          
|Purchases of investments and other 
    assets                | -      | -       | -      | (1,047.2) | -       | (1,047.2)
|Maturities and redemptions of fixed 
    maturity investments | -      | -       | -      | 353.7     | -       | 353.7    
|Sales of investments and other assets                         | -      | -       | -      | 463.4     | -       | 463.4    
|Decrease in policy loans                                      | -      | -       | -      | 1.4       | -       | 1.4      
|                                                              | -      | -       | -      | (228.7)   | -       | (228.7)  
|                                                              |        |         |        |           |         |          
|Cash Flows from Financing Activities:                         |        |         |        |           |         |          
|Fixed annuity receipts                                        | -      | -       | -      | 214.5     | -       | 214.5    
|Annuity surrenders, benefits and
    withdrawals              | -      | -       | -      | (140.3)   | -       | (140.3)  
|Net transfers from variable annuity
    assets                | -      | -       | -      | 8.6       | -       | 8.6      
|Reductions of notes payable                                   | (0.1)  | -       | -      | -         | -       | (0.1)    
|Issuance of Common Stock                                      | 0.8    | -       | -      | -         | -       | 0.8      
|Retirement of Common Stock                                    | (0.4)  | -       | -      | -         | -       | (0.4)    
|Trust dividend requirements                                   | -      | -       | (3.5)  | -         | 3.5     | -        
|                                                              | 0.3    | -       | (3.5)  | 82.8      | 3.5     | 83.1     
|                                                              |        |         |        |           |         |          
|Net increase (decrease) in cash and 
  short-term investments | 0.2    | -       | -      | (68.6)    | -       | (68.4)   
|Beginning cash and short-term investments                     | 1.9    | -       | -      | 400.3     | -       | 402.2    
|                                                              |        |         |        |           |         |          
|Ending cash and short-term investments                        | $ 2.1  | $  -    | $ -    | $  331.7  | $  -    | $  333.8 





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



ITEM 2



Management's Discussion and Analysis

of Financial Condition and Results of Operations



---

|Index to MD&A                  
|-------------------------------
|Page                           
|Forward-Looking Statements     
|Overview                       
|Critical Accounting Policies   
|Liquidity and Capital Resources
|Ratios                         
|Sources and Uses of Funds      
|Independent Ratings            
|Investments                    
|                               
|                               
|                               



---

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements.  Some of the forward-looking statements can be identified by the use of forward-looking words such as "anticipates", "believes", "expects", "estimates", "intends", "plans", "seeks", "could", "may", "should", "will" or the negative version of those words or other comparable terminology.  Examples of such forward-looking statements relate to: expectations concerning market and other conditions and their effect on future premiums, revenues, earning and investment activities; recoverability of asset values; mortality and the adequacy of reserves for environmental pollution.

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 environments;
- 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 statement to reflect subsequent events or circumstances.







GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

OVERVIEW

Financial Condition

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.

GAFRI strengthened its capital and liquidity in the first quarter of 2004 with stockholders' equity (excluding unrealized gains) growing by $18 million to $798 million and reduced its debt to capital ratio from 31% at December 31, 2003 to 30% at March 31, 2004.  Also in the first quarter of 2004, GAFRI issued $86.3 million of 7-1/4% senior debentures using the proceeds to retire its 9-1/4% TOPrS and repurchase a portion of its 8-7/8% trust preferred securities.

Results of Operations

Through the operations of its insurance subsidiaries, GAFRI is engaged in the sale of retirement annuities and various forms of supplemental insurance products.

GAFRI's net income for the first quarter of 2004 was $17.0 million ($0.36 per diluted share) compared to $8.3 million ($0.20 per diluted share) in the first quarter of 2003.  GAFRI's first quarter 2004 results reflect improved realized gains and improved operating results in the Company's supplemental insurance operations, partially offset by the impact of the continued low interest rate environment on the Company's fixed annuity operations, the recent issuance of long-term debt to reduce lower costing bank debt with a shorter maturity, resulting in higher interest expense in 2004 and a $2.2 million after-tax charge relating to the implementation of Statement of Position ("SOP") 03-1, "Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts."

CRITICAL ACCOUNTING POLICIES

Significant accounting policies are described in Note B to the financial statements.  The preparation of financial statements requires management to make estimates and assumptions that can have a significant effect on amounts reported in the financial statements.  As more information becomes known, these estimates and assumptions could change and thus impact amounts reported in the future.  Management believes that the establishment of insurance reserves, the determination of "other than temporary" impairments on investments, the recoverability and carrying value of unamortized insurance acquisition costs and environmental reserves of GAFRI's former manufacturing operations are the areas where the degree of judgement required to determine amounts recorded in the financial statements make the accounting policies critical.  For further discussion of these policies, see "Liquidity and Capital Resources - Investments" and in GAFRI's 2003 Form 10-K "Liquidity and Capital Resources - Uncertainties."







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 March 31, 2004, the capital ratio of GAFRI's principal insurance subsidiary was 6.1 times its authorized control level RBC.

Sources and Uses of Funds

The Company has an unsecured credit agreement that matures on December 31, 2004.  Amounts borrowed bear interest at floating rates based on prime or Eurodollar rates.  GAFRI's credit agreement provides up to $155 million of availability; there were no borrowings outstanding under the line of credit at March 31, 2004.

In January 2004, GAFRI raised approximately $84 million through the issuance of 7-1/4% Senior Debentures due 2034.  The majority of the proceeds were used to redeem the Company's 9-1/4% trust preferred securities.  The remaining proceeds were used to repurchase a portion of its outstanding 8-7/8% preferred securities.  Under a currently effective shelf registration, GAFRI can issue up to an aggregate of $51.3 million in additional equity or debt securities.  All debentures issued by GAFRI are rated investment grade by three nationally recognized rating agencies.

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



Following are the Company's ratings as of March 31, 2004:



| |       |                |             | 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 in the "A" category by A.M. Best 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 than it has in recent years 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 the 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.

Investments

GAFRI invests primarily in fixed income investments which, including loans and short-term investments, comprised 98% of its investment portfolio at March 31, 2004.  GAFRI generally invests in securities having intermediate-term maturities with an objective of optimizing interest yields while maintaining an appropriate relationship of maturities between GAFRI's assets and expected liabilities.









GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

The NAIC assigns quality ratings to publicly traded as well as privately placed securities.  At March 31, 2004, 94% of GAFRI's fixed maturity portfolio was 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 March 31, 2004, GAFRI's mortgage-backed securities ("MBSs") portfolio represented approximately 30% of its 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, GAFRI has 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 7.0% at January 1, 2003 to 6.2% at March 31, 2004.

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.

Summarized information for the unrealized gains and losses recorded in GAFRI's balance sheet at March 31, 2004, is shown in the following table (dollars in millions).  Approximately $59 million of available-for-sale "Fixed Maturities" and $6 million of "Equity Securities" had no unrealized gains or losses at March 31, 2004.



|                                                      | Securities 
with 
Unrealized | Securities 
with 
Unrealized
|----------------------------------------------------- | ---------------------------- | ----------------------------
|                                                      | Gains                        | Losses                      
|Available-for-sale Fixed Maturities                   |                              |                             
|Market value of securities                            | $7,102                       | $896                        
|Amortized cost of securities                          | $6,651                       | $913                        
|Gross unrealized gain (loss)                          | $  451                       | ($ 17)                      
|Market value as % of amortized cost                   | 107%                         | 98%                         
|Number of security positions                          | 1,193                        | 98                          
|Number individually exceeding $2 million gain or loss | 13                           | -                           
|Concentration of gains (losses) by type or industry   |                              |                             
|(exceeding 5% of unrealized):                         |                              |                             
|Gas and electric services                             | $ 58.2                       | ($3.1)                      
|Mortgage-backed securities                            | 52.3                         | (4.3)                       
|Banks, savings and credit institutions                | 52.2                         | -                           
|U.S. government and government agencies               | 25.2                         | (1.2)                       
|State and municipal                                   | 19.0                         | (1.0)                       
|Asset-backed securities                               | 16.5                         | (2.6)                       
|Air transportation (generally collateralized)         | 5.8                          | (1.2)                       
|Percentage rated investment grade                     | 95%                          | 92%                         



|Equity Securities            |      |     
|---------------------------- | ---- | ----
|Market value of securities   | $89  | $12 
|Cost of securities           | $41  | $12 
|Gross unrealized gain (loss) | $48  | $ - 
|Market value as % of cost    | 217% | 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 $42 million of the $48 million in unrealized gains on equity securities at March 31, 2004.  In the first quarter of 2004, Provident announced that it was being acquired by National City Corporation.  If this transaction is completed, GAFRI will receive approximately 1.7 million common and common equivalent shares ($57 million market value at April 30, 2004) of National City in exchange for its investment in Provident.

The table below sets forth the scheduled maturities of GAFRI's available-for-sale fixed maturity securities at March 31, 2004, 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                   | 2%                           | 2%                          
|After one year through five years  | 18                           | 33                          
|After five years through ten years | 36                           | 7                           
|After ten years                    | 14                           | 13                          
|                                   | 70                           | 55                          
|Mortgage-backed securities         | 30                           | 45                          
|                                   | 100%                         | 100%                        



---

*Excludes $59 million of fixed maturities with no unrealized gains or losses.

GAFRI realized aggregate losses of $1.6 million during the first quarter of 2004 on $9.8 million in sales of fixed maturity securities (2 issues/issuers) that had individual unrealized losses greater than $500,000 at December 31, 2003.  Market values of both of the issues increased an aggregate of $1.2 million from December 31 to date of sale.

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 March 31, 2004, 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 March 31, 2004            |                         |                                   |                                  
|                                              |                         |                                   |                                  
|Securities with unrealized gains at 3/31/04:  |                         |                                   |                                  
|Exceeding $500,000 (328 issues):              | $3,629                  | $315                              | 109.5%                           
|Less than $500,000 (865 issues):              | 3,473                   | 136                               | 104.1%                           
|                                              | $7,102                  | $451                              | 106.8%                           
|                                              |                         |                                   |                                  
|Securities with unrealized losses at 3/31/04: |                         |                                   |                                  
|Exceeding $500,000 (13 issues):               | $  136                  | ($ 10)                            | 93.2%                            
|Less than $500,000 (85 issues):               | 760                     | (7)                               | 99.1%                            
|                                              | $  896                  | ($ 17)                            | 98.1%                            
|                                              |                         |                                   |                                  
|Equity Securities at March 31, 2004           |                         |                                   |                                  
|                                              |                         |                                   |                                  
|Securities with unrealized gains at 3/31/04:  |                         |                                   |                                  
|Exceeding $500,000 (2 issues):                | $66                     | $45                               | 314.3%                           
|Less than $500,000 (23 issues):               | 23                      | 3                                 | 115.0%                           
|                                              | $89                     | $48                               | 217.1%                           
|                                              |                         |                                   |                                  
|Securities with unrealized losses at 3/31/04: |                         |                                   |                                  
|Exceeding $500,000 (0 issues):                | $ -                     | $ -                               | -                                
|Less than $500,000 (4 issues):                | 12                      | -                                 | 100.0%                           
|                                              | $12                     | $ -                               | 100.0%                           
|                                              |                         |                                   |                                  

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.

|                                      | Aggregate
Market
Value | Aggregate 
Unrealized Gain(Loss) | Market
Value as
% of Cost
Basis
|------------------------------------- | ---------------------- | -------------------------------- | -------------------------------
|                                     
|                                     
|                                     
|Fixed Maturities with Unrealized      |                        |                                  |                                
|Losses at March 31, 2004              |                        |                                  |                                
|                                      |                        |                                  |                                
|Investment grade with losses for:     |                        |                                  |                                
|One year or less (58 issues)          | $783                   | ($ 7)                            | 99.1%                          
|Greater than one year (10 issues)     | 43                     | (3)                              | 93.5%                          
|                                      | $826                   | ($10)                            | 98.8%                          
|                                      |                        |                                  |                                
|                                      |                        |                                  |                                
|Non-investment grade with losses for: |                        |                                  |                                
|One year or less (12 issues)          | $ 27                   | ($ 1)                            | 96.4%                          
|Greater than one year (18 issues)     | 43                     | (6)                              | 87.8%                          
|                                      | $ 70                   | ($ 7)                            | 90.9%                          
|                                      |                        |                                  |                                
|                                      |                        |                                  |                                
|Equity Securities with Unrealized     |                        |                                  |                                
|Losses at March 31, 2004              |                        |                                  |                                
|                                      |                        |                                  |                                
|One year or less (3 issues)           | $ 12                   | $ -                              | 100.0%                         
|Greater than one year (1 issue)       | -                      | -                                | -                              
|                                      | $ 12                   | $ -                              | 100.0%                         
|                                      |                        |                                  |                                





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

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 2003 Form 10-K.

Based on its analysis, 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.  Management believes it is not likely that future impairment charges will have a significant effect on GAFRI's liquidity.



RESULTS OF OPERATIONS

General

Operating earnings before income taxes increased $16.7 million in the first quarter of 2004 compared to the comparable 2003 period.  The increase is due primarily to significantly lower provisions for impairments on investments in the first quarter of 2004 compared to the first quarter of 2003.

Retirement Products

|Three months ended                   
|-------------------------------------
|March 31,                            
|                                     
|Annuity Premiums                     
|Single premium fixed rate annuities  
|Flexible premium fixed rate annuities
|Single premium variable annuities    
|Flexible premium variable annuities  
|                                     

Fixed annuity sales decreased in the first quarter of 2004 compared to the same period in the prior year as the Company continues to maintain discipline in setting its commission and interest rates, resulting in slowed sales of single premium 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
|------------------
|March 31,         
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  

The increase in premiums and benefits for the supplemental insurance products represents the addition of new distribution sources in 2003.

As previously announced, GALIC's life division will no longer be issuing life insurance policies beginning in the second quarter of 2004.

Net Investment Income

Realized Gains (Losses) on Investments and Retirement of Subsidiary Trust Debt

Loss on retirement of subsidiary trust debt reflects pretax losses on repurchases of $27.2 million principal amount of the Company's 8-7/8% trust preferred securities in the first quarter of 2004.

Other Income

Real Estate Operations



|Three months ended
|------------------
|March 31,         
|                  
|Other income      
|Other expenses    







GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

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 one-half of GAFRI's annuity benefits accumulated relate to policies that have a minimum guarantee of 3%; the majority of the balance has a guarantee of 4%.  Beginning in the fourth quarter of 2003, in states where required approvals have been received, the Company began issuing products with guaranteed minimum crediting rates of less than 3%.

Insurance Acquisition Expenses

Insurance acquisition expenses increased $3.8 million (14%) in the first quarter of 2004 compared to the same period in 2003 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.

Interest on Subsidiary Trust Obligations

Other Interest and Debt Expenses

Income Taxes





GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

Cumulative Effect of Accounting Change

Proposed Standard on Equity Compensation

Item 3



Quantitative and Qualitative Disclosure of Market Risk

Debt Securities

As of March 31, 2004, there were no other material changes to the information provided in GAFRI's Form 10-K for 2003 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-14c) 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 18 USC Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.







|Date of Report    | Items Reported                                      
|----------------- | ----------------------------------------------------
|                  |                                                     
|January 21, 2004  | Press Release regarding GAFRI's 7-1/4% Debt Offering
|                  |                                                     
|February 12, 2004 | Fourth Quarter and Full Year 2003 Earnings Release  
|                  |                                                     
|April 26, 2004    | First Quarter 2004 Earnings Release                 













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.
|----------- |  | ----------------------------------------
|            |  |                                         
|            |  |                                         
|            |  |                                         
|May 7, 2004 |  | BY:/s/Christopher P. Miliano            
|            |  | Christopher P. Miliano                  
|            |  | Chief Financial Officer