|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
June 30, 2001 | Commission File
No. 1-11632
|-------------------------------------------- | ---------------------------





|GREAT AMERICAN FINANCIAL RESOURCES, INC.
|----------------------------------------





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



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





Page 1 of 25



GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

PART I

FINANCIAL INFORMATION



|GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES
|---------------------------------------------------------
|CONSOLIDATED BALANCE SHEET                               
|(Dollars in millions)                                    
|                                                         
|                                                         
|                                                         
|                                                         
|Assets                                                   
|Investments:                                             
|Fixed maturities - at market                             
|(amortized cost - $6,186.3 and $6,088.0)                 
|Equity securities - at market                            
|(cost - $37.8 and $30.5)                                 
|Investment in affiliate                                  
|Mortgage loans on real estate                            
|Real estate                                              
|Policy loans                                             
|Short-term investments                                   
|Total investments                                        
|                                                         
|Cash                                                     
|Accrued investment income                                
|Unamortized insurance acquisition costs, net             
|Other assets                                             
|Variable annuity assets (separate accounts)              
|                                                         
|                                                         
|                                                         
|Liabilities and Capital                                  
|Annuity benefits accumulated                             
|Life, accident and health reserves                       
|Notes payable                                            
|Payable to affiliates, net                               
|Deferred taxes on unrealized gains                       
|Accounts payable, accrued expenses and other             
|liabilities                                              
|Variable annuity liabilities (separate accounts)         
|Total liabilities                                        
|                                                         
|                                                         
|Mandatorily redeemable preferred securities              
|of subsidiary trusts                                     
|                                                         
|                                                         
|Stockholders' Equity:                                    
|Common Stock, $1 par value                               
|-100,000,000 shares authorized                           
|- 42,303,906 and 42,302,788 shares outstanding           
|Capital surplus                                          
|Retained earnings                                        
|Unrealized gains on marketable securities, net           
|Total stockholders' equity                               
|                                                         
|                                                         
|                                                         

2

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(In millions, except per share amounts)



|Three months ended                            | Six months ended
|--------------------------------------------- | ----------------
|June 30,                                      | June 30,        
|                                              | 2001            
|Revenues:                                     |                 
|Life, accident and health premiums            | $ 70.5          
|Net investment income                         | 124.9           
|Realized losses                               | (22.7)          
|Other income                                  | 23.9            
|                                              | 196.6           
|Costs and Expenses:                           |                 
|Annuity benefits                              | 70.7            
|Life, accident and health benefits            | 52.3            
|Insurance acquisition expenses                | 19.8            
|Trust preferred distribution requirement      | 4.7             
|Interest and other debt expenses              | 2.7             
|Other expenses                                | 39.3            
|                                              | 189.5           
|                                              |                 
|Operating earnings (loss) before income taxes | 7.1             
|Provision (credit) for income taxes           | 1.5             
|                                              |                 
|Net operating earnings (loss)                 | 5.6             
|                                              |                 
|Equity in earnings of affiliate, net of tax   | -               
|                                              |                 
|                                              |                 
|Net Income (Loss)                             | $  5.6          
|                                              |                 
|Earnings (loss) per common share:             |                 
|Basic                                         | $0.13           
|Diluted                                       | $0.13           
|                                              |                 
|                                              |                 
|Average number of common shares:              |                 
|Basic                                         | 42.3            
|Diluted                                       | 42.7            
|                                              |                 

3

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(In millions)

|                                                  | Six months ended
|------------------------------------------------- | ----------------
|                                                  | June 30,        
|                                                  | 2001            
|Common Stock:                                     |                 
|Balance at beginning of period                    | $ 42.3          
|Common Stock retired                              | -               
|Balance at end of period                          | $ 42.3          
|                                                  |                 
|                                                  |                 
|Capital Surplus:                                  |                 
|Balance at beginning of period                    | $348.5          
|Common Stock issued                               | 0.4             
|Common Stock retired                              | (0.3)           
|Balance at end of period                          | $348.6          
|                                                  |                 
|                                                  |                 
|                                                  |                 
|Retained Earnings:                                |                 
|Balance at beginning of period                    | $237.0          
|Net income                                        | 23.5            
|Balance at end of period                          | $260.5          
|                                                  |                 
|                                                  |                 
|Unrealized Gains (Losses), Net:                   |                 
|Balance at beginning of period                    | $ 43.9          
|Change during period                              | 16.2            
|Balance at end of period                          | $ 60.1          
|                                                  |                 
|                                                  |                 
|                                                  |                 
|                                                  |                 
|                                                  |                 
|                                                  |                 
|                                                  |                 
|Comprehensive Income:                             |                 
|Net income                                        | $ 23.5          
|Other comprehensive income (loss) - change in net |                 
|unrealized gains (losses)                         | 16.2            
|Comprehensive income (loss)                       | $ 39.7          
|                                                  |                 

4

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(In millions)



|                                                         | Six months ended
|-------------------------------------------------------- | ----------------
|                                                         | June 30,        
|                                                         | 2001            
|Cash Flows from Operating Activities:                    |                 
|Net income                                               | $ 23.5          
|Adjustments:                                             |                 
|Equity in earnings of affiliate, net of tax              | -               
|Increase in life, accident and health reserves           | 21.5            
|Benefits to annuity policyholders                        | 140.0           
|Amortization of insurance acquisition costs              | 41.1            
|Depreciation and amortization                            | 4.8             
|Realized losses                                          | 24.5            
|Increase in insurance acquisition costs                  | (73.5)          
|Other, net                                               | (25.2)          
|                                                         | 156.7           
|                                                         |                 
|Cash Flows from Investing Activities:                    |                 
|Purchases of and additional investments in:              |                 
|Fixed maturity investments                               | (539.4)         
|Equity securities                                        | (2.0)           
|Real estate, mortgage loans and other assets             | (7.5)           
|Maturities and redemptions of fixed maturity investments | 234.5           
|Sales of:                                                |                 
|Fixed maturity investments                               | 199.9           
|Equity securities                                        | 1.2             
|Real estate, mortgage loans and other assets             | 19.0            
|Decrease in policy loans                                 | 2.8             
|                                                         | (91.5)          
|                                                         |                 
|Cash Flows from Financing Activities:                    |                 
|Fixed annuity receipts                                   | 271.8           
|Annuity surrenders, benefits and withdrawals             | (341.3)         
|Net transfers to variable annuity assets                 | (1.4)           
|Additions to notes payable                               | 4.7             
|Reductions of notes payable                              | (12.2)          
|Issuance of Common Stock                                 | 0.4             
|Retirement of Common Stock                               | (0.3)           
|Repurchase of trust preferred securities                 | -               
|                                                         | (78.3)          
|                                                         |                 
|Net decrease in cash and short-term investments          | (13.1)          
|Beginning cash and short-term investments                | 87.5            
|Ending cash and short-term investments                   | $ 74.4          
|                                                         |                 

5

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



A.

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

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

B.

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

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

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

Investments

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

Investment in Affiliate

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

6

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



Insurance Acquisition Costs and Expenses

Deferred Policy Acquisition Costs ("DPAC")

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

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

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

Present Value of Future Profits

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

Annuity Benefits Accumulated

Life, Accident and Health Reserves

7

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



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

Variable Annuity Assets and Liabilities

Life, Accident and Health Premiums and Benefits

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

Income Taxes

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

Stock-Based Compensation

8

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



Benefit Plans

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

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

Derivatives

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

Earnings Per Share

Statement of Cash Flows

9

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



C.	Segments of Operations

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

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

GA Life of Puerto Rico sells in-home life and supplemental health products through a network of company-employed agents.  Sales in Puerto Rico accounted for approximately 20% of GAFRI's life, accident and health premiums in the first six months of 2001 compared to 25% in the comparable period in 2000.

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

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



|                                                         | Three months ended | Six months ended
|-------------------------------------------------------- | ------------------ | ----------------
|                                                         | June 30,           | June 30,        
|                                                         | 2001               | 2000            
|                                                         |                    |                 
|Revenues                                                 |                    |                 
|Life and annuity products                                | $141.5             | $138.4          
|Supplemental insurance products                          | 59.5               | 41.9            
|GA Life of Puerto Rico                                   | 15.8               | 14.4            
|Corporate and other                                      | 2.5                | 2.0             
|Total operating revenues                                 | 219.3              | 196.7           
|                                                         |                    |                 
|Realized losses                                          | (22.7)             | (0.8)           
|Total revenues per statement of
operations               | $196.6             | $195.9          
|                                                         |                    |                 
|                                                         |                    |                 
|Operating profit (loss) - pretax                         |                    |                 
|Life and annuity products (excluding
litigation charges) | $ 35.7             | $ 36.9          
|Supplemental insurance products                          | 0.3                | (2.5)           
|GA Life of Puerto Rico                                   | 2.5                | 2.2             
|Litigation charges                                       | -                  | (32.5)          
|Corporate and other                                      | (8.7)              | (9.4)           
|Pretax earnings (loss) from
operations                   | 29.8               | (5.3)           
|                                                         |                    |                 
|Realized losses                                          | (22.7)             | (0.8)           
|Total pretax income (loss) per                           |                    |                 
|statement of operations                                  | $  7.1             | ($  6.1)        

10

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



D.	Investment in Affiliate

Investment in affiliate reflects GAFRI's 4% ownership (2.7 million shares) of the common stock of Chiquita Brands International. AFG and its other subsidiaries own an additional 29% interest in the common stock of Chiquita. Chiquita is a leading international marketer, producer and distributor of quality fresh fruits and vegetables and processed foods.

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

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

E.	Unamortized Insurance Acquisition Costs

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



|                                         | June 30, | December 31,
|---------------------------------------- | -------- | ------------
|                                         | 2001     | 2000        
|                                         |         
|Deferred policy acquisition costs        | $581.6   | $536.9      
|Present value of future profits acquired | 87.6     | 93.4        
|Unearned revenues                        | (141.7)  | (142.4)     
|                                         | $527.5   | $487.9      

F.	Notes Payable

Notes payable consisted of the following (in millions):





|                                                  | June 30, | December 31,
|------------------------------------------------- | -------- | ------------
|                                                  | 2001     | 2000        
|                                                  |         
|Direct obligations of GAFRI                       | $  2.0   | $  2.0      
|Obligations of AAG Holding (guaranteed by GAFRI): |          |             
|6-7/8% Senior Notes due 2008                      | 100.0    | 100.0       
|Bank Credit Line                                  | 41.3     | 48.5        
|Other subsidiary debt                             | 1.1      | 1.4         
|Total                                             | $144.4   | $151.9      

In January 2001, AAG Holding replaced its existing bank line with a $155 million unsecured credit agreement. Loans under the credit agreement mature on December 31, 2004. At June 30, 2001, the weighted-average interest rate on amounts borrowed under its credit line was 4.81%.

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



|2001 | 2002 | 2003 | 2004  | 2005 | 2006
|---- | ---- | ---- | ----- | ---- | ----
|$0.3 | $0.7 | $0.6 | $41.5 | $0.2 | $0.2

11

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



G.	Mandatorily Redeemable Preferred Securities of Subsidiary Trusts

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



|Date of       |                       |             |             | Optional             
|------------- | --------------------- | ----------- | ----------- | ---------------------
|Issuance      | Issue (Maturity Date) | 06/30/01    | 12/31/00    | Redemption Dates     
|November 1996 | 9-1/4% TOPrS*  (2026) | $72,912,500 | $72,912,500 | On or after 11/7/2001
|March 1997    | 8-7/8% Pfd     (2027) | 70,000,000  | 70,000,000  | On or after 3/1/2007 
|May 1997      | 7-1/4% ROPES** (2041) | 75,000,000  | 75,000,000  | After 9/28/2001      



*  Trust Originated Preferred Securities

** Remarketed Par Securities

Until September 28, 2001 (the "Remarketing Date"), the obligations of GAFRI under the ROPES indenture and guarantee are senior unsecured obligations of the Company. On that date, the distribution rate on the ROPES will be reset to current market rates (not to exceed 8.8%) and the ROPES will become subordinate to all senior indebtedness of the Company.  Given the current interest rate environment for these types of securities, GAFRI expects to redeem its ROPES in September 2001 using bank borrowings.

H.	Stockholders' Equity

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

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

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



|                                           | 2001   | 2000  
|------------------------------------------ | ------ | ------
|                                           | Pretax | Taxes 
|Unrealized holding gains (losses) on       |        |       
|securities arising during the period       | $ 2.1  | ($0.8)
|Realized losses on securities              | 23.0   | (8.1) 
|Change in net unrealized gains (losses) on |        |       
|marketable securities                      | $25.1  | ($8.9)

12

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



I.	Earnings Per Share

The number of common shares outstanding used in calculating diluted earnings per share in both the second quarter and first six months of 2001 includes 0.4 million shares compared to 0.3 million shares for the same periods in 2000 for the effect of the assumed exercise of GAFRI's dilutive stock options.

J.	Contingencies

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

K.	Additional Information

Statutory Information of Great American Life Insurance Company

|                              | June 30, | December 31,
|----------------------------- | -------- | ------------
|                              | 2001     | 2000        
|Capital and surplus           | $338.0   | $362.5      
|Asset valuation reserve       | 71.3     | 75.6        
|Interest maintenance reserve  | 2.6      | 3.3         
|                              |          |             
|Six months ended June 30,    
|                              | 2001     | 2000        
|Pretax income from operations | $30.7    | $38.2       
|Net income from operations    | 23.0     | 29.7        
|Net income                    | 14.4     | 32.1        

The amount of dividends which can be paid by GALIC without prior approval of regulatory authorities is subject to restrictions relating to capital and surplus and statutory net income. Based on net income for the year ended December 31, 2000, GALIC may pay $52.1 million in dividends in 2001 without prior approval. In the first six months of 2001, GALIC paid $8.0 million in dividends.

13

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



Condensed Consolidating Information

GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

JUNE 30, 2001

(In millions)



|                                                                     |        | AAG      | TOTAL  | ALL OTHER | CONS       | TOTAL   
|-------------------------------------------------------------------- | ------ | -------- | ------ | --------- | ---------- | --------
|                                                                     | GAFRI  | HOLDING  | TRUSTS | SUBS      | ENTRIES    | CONS    
|                                                                     |        |          |        |           |            |         
|Assets                                                               |        |          |        |           |            |         
|Cash and investments                                                 | $ 30.2 | $     -  | $   -  | $6,681.1  | ($   15.8) | $6,695.5
|Investment in subsidiaries                                           | 626.9  | 1,021.0  | -      | 1.0       | (1,648.9)  | -       
|Notes receivable from AAG   Holding                                  | 102.4  | -        | 232.0  | -         | (334.4)    | -       
|Unamortized insurance   acquisition costs, net                       | -      | -        | -      | 527.5     | -          | 527.5   
|Other assets                                                         | 20.8   | 9.8      | 6.0    | 268.0     | 38.7       | 343.3   
|Variable annuity assets   (separate accounts)                        | -      | -        | -      | 530.7     | -          | 530.7   
|                                                                     | $780.3 | $1,030.8 | $238.0 | $8,008.3  | ($1,960.4) | $8,097.0
|                                                                     |        |          |        |           |            |         
|Liabilities and Capital                                              |        |          |        |           |            |         
|Insurance liabilities                                                | -      | -        | -      | 6,210.2   | (4.6)      | 6,205.6 
|Notes payable to GAFRI                                               | -      | 102.4    | -      | 0.1       | (102.5)    | -       
|Notes payable to Trusts                                              | -      | 232.0    | -      | -         | (232.0)    | -       
|Other notes payable                                                  | 2.0    | 141.3    | -      | 1.1       | -          | 144.4   
|Other liabilities                                                    | 66.8   | -        | 6.0    | 229.3     | (15.2)     | 286.9   
|Variable annuity liabilities
(separate accounts)                     | -      | -        | -      | 530.7     | -          | 530.7   
|                                                                     | 68.8   | 475.7    | 6.0    | 6,971.4   | (354.3)    | $7,167.6
|                                                                     |        |          |        |           |            |         
|Mandatorily redeemable   preferred securities of   subsidiary trusts | -      | -        | 225.0  | -         | (7.1)      | 217.9   
|                                                                     |        |          |        |           |            |         
|Total stockholders' equity                                           | 711.5  | 555.1    | 7.0    | 1,036.9   | (1,599.0)  | 711.5   
|                                                                     | $780.3 | $1,030.8 | $238.0 | $8,008.3  | ($1,960.4) | $8,097.0

14

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2000

(In millions)



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

15

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDING JUNE 30, 2001

(In millions)



|                                          |       | AAG     | TOTAL  | ALL OTHER | CONS    | TOTAL 
|----------------------------------------- | ----- | ------- | ------ | --------- | ------- | ------
|                                          | GAFRI | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS  
|                                          |       |         |        |           |         |       
|Revenues:                                 |       |         |        |           |         |       
|Life, accident and health premiums        | $  -  | $  -    | $ -    | $ 70.5    | $  -    | $ 70.5
|Net investment income and other   revenue | 6.5   | -       | -      | 124.2     | (4.6)   | 126.1 
|Interest income on AAG Holding notes      | -     | -       | 4.9    | -         | (4.9)   | -     
|Equity in earnings of subsidiaries        | 4.9   | 14.5    | -      | -         | (19.4)  | -     
|                                          | 11.4  | 14.5    | 4.9    | 194.7     | (28.9)  | 196.6 
|                                          |       |         |        |           |         |       
|Costs and Expenses:                       |       |         |        |           |         |       
|Insurance benefits and expenses           | -     | -       | -      | 142.8     | -       | 142.8 
|Interest expense on AAG Holding   notes   | -     | 4.9     | -      | -         | (4.9)   | -     
|Other interest and debt expenses          | 0.1   | 5.0     | -      | -         | 2.3     | 7.4   
|Other expenses                            | 4.2   | 2.1     | -      | 35.1      | (2.1)   | 39.3  
|                                          | 4.3   | 12.0    | -      | 177.9     | (4.7)   | 189.5 
|                                          |       |         |        |           |         |       
|Earnings before income taxes              | 7.1   | 2.5     | 4.9    | 16.8      | (24.2)  | 7.1   
|Provision for income taxes                | 1.5   | 0.7     | -      | 4.5       | (5.2)   | 1.5   
|                                          |       |         |        |           |         |       
|Net income                                | $ 5.6 | $ 1.8   | $4.9   | $ 12.3    | ($19.0) | $  5.6





GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDING JUNE 30, 2001

(In millions)



|                                          |       | AAG     | TOTAL  | ALL OTHER | CONS    | TOTAL 
|----------------------------------------- | ----- | ------- | ------ | --------- | ------- | ------
|                                          | GAFRI | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS  
|                                          |       |         |        |           |         |       
|Revenues:                                 |       |         |        |           |         |       
|Life, accident and health premiums        | $  -  | $  -    | $ -    | $139.7    | $  -    | $139.7
|Net investment income and other   revenue | 13.4  | -       | -      | 270.1     | (9.6)   | 273.9 
|Interest income on AAG Holding notes      | -     | -       | 9.8    | -         | (9.8)   | -     
|Equity in earnings of subsidiaries        | 27.3  | 47.0    | -      | -         | (74.3)  | -     
|                                          | 40.7  | 47.0    | 9.8    | 409.8     | (93.7)  | 413.6 
|                                          |       |         |        |           |         |       
|Costs and Expenses:                       |       |         |        |           |         |       
|Insurance benefits and expenses           | -     | -       | -      | 287.4     | -       | 287.4 
|Interest expense on AAG Holding   notes   | -     | 9.8     | -      | -         | (9.8)   | -     
|Other interest and debt expenses          | 0.1   | 10.2    | -      | -         | 4.4     | 14.7  
|Other expenses                            | 7.3   | 4.7     | -      | 70.6      | (4.4)   | 78.2  
|                                          | 7.4   | 24.7    | -      | 358.0     | (9.8)   | 380.3 
|                                          |       |         |        |           |         |       
|Earnings before income taxes              | 33.3  | 22.3    | 9.8    | 51.8      | (83.9)  | 33.3  
|Provision for income taxes                | 9.8   | 7.5     | -      | 15.3      | (22.8)  | 9.8   
|                                          |       |         |        |           |         |       
|Net income                                | $23.5 | $14.8   | $9.8   | $ 36.5    | ($61.1) | $ 23.5



16

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDING JUNE 30, 2000

(In millions)



|                                              |         | AAG     | TOTAL  | ALL OTHER | CONS    | TOTAL   
|--------------------------------------------- | ------- | ------- | ------ | --------- | ------- | --------
|                                              | GAFRI   | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS    
|                                              |         |         |        |           |         |         
|Revenues:                                     |         |         |        |           |         |         
|Life, accident and health premiums            | $  -    | $  -    | $ -    | $ 49.7    | $ -     | $ 49.7  
|Net investment income and other   revenue     | 6.7     | -       | -      | 145.1     | (5.6)   | 146.2   
|Interest income on AAG Holding   notes        | -       | -       | 4.9    | -         | (4.9)   | -       
|Equity in earnings of subsidiaries            | (10.0)  | 1.1     | -      | -         | 8.9     | -       
|                                              | (3.3)   | 1.1     | 4.9    | 194.8     | (1.6)   | 195.9   
|                                              |         |         |        |           |         |         
|Costs and Expenses:                           |         |         |        |           |         |         
|Insurance benefits and expenses               | -       | -       | -      | 135.3     | -       | 135.3   
|Interest expense on AAG Holding   notes       | -       | 4.9     | -      | -         | (4.9)   | -       
|Other interest and debt expenses              | 0.1     | 6.0     | -      | -         | 2.2     | 8.3     
|Other expenses                                | 2.7     | 3.5     | -      | 55.0      | (2.8)   | 58.4    
|                                              | 2.8     | 14.4    | -      | 190.3     | (5.5)   | 202.0   
|                                              |         |         |        |           |         |         
|Operating earnings (loss) before
income taxes | (6.1)   | (13.3)  | 4.9    | 4.5       | 3.9     | (6.1)   
|Provision (credit)for income taxes            | (4.0)   | (4.9)   | -      | 0.6       | 4.3     | (4.0)   
|                                              |         |         |        |           |         |         
|Net operating earnings (loss)                 | (2.1)   | (8.4)   | 4.9    | 3.9       | (0.4)   | (2.1)   
|                                              |         |         |        |           |         |         
|Equity in earnings of affiliate,   net of tax | 0.2     | -       | -      | -         | -       | 0.2     
|                                              |         |         |        |           |         |         
|Net income (loss)                             | ($ 1.9) | ($ 8.4) | $4.9   | $  3.9    | ($0.4)  | ($  1.9)





GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDING JUNE 30, 2000

(In millions)



|                                              |       | AAG     | TOTAL  | ALL OTHER | CONS    | TOTAL 
|--------------------------------------------- | ----- | ------- | ------ | --------- | ------- | ------
|                                              | GAFRI | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS  
|                                              |       |         |        |           |         |       
|Revenues:                                     |       |         |        |           |         |       
|Life, accident and health premiums            | $  -  | $  -    | $ -    | $ 99.6    | $  -    | $ 99.6
|Net investment income and other   revenue     | 14.2  | -       | -      | 280.3     | (11.2)  | 283.3 
|Interest income on AAG Holding notes          | -     | -       | 9.8    | -         | (9.8)   | -     
|Equity in earnings of subsidiaries            | 9.2   | 30.6    | -      | -         | (39.8)  | -     
|                                              | 23.4  | 30.6    | 9.8    | 379.9     | (60.8)  | 382.9 
|                                              |       |         |        |           |         |       
|Costs and Expenses:                           |       |         |        |           |         |       
|Insurance benefits and expenses               | -     | -       | -      | 253.4     | -       | 253.4 
|Interest expense on AAG Holding   notes       | -     | 9.8     | -      | -         | (9.8)   | -     
|Other interest and debt expenses              | 0.1   | 12.0    | -      | 0.1       | 4.3     | 16.5  
|Other expenses                                | 6.3   | 5.5     | -      | 89.9      | (5.7)   | 96.0  
|                                              | 6.4   | 27.3    | -      | 343.4     | (11.2)  | 365.9 
|                                              |       |         |        |           |         |       
|Operating earnings before income   taxes      | 17.0  | 3.3     | 9.8    | 36.5      | (49.6)  | 17.0  
|Provision for income taxes                    | 2.5   | 1.0     | -      | 11.2      | (12.2)  | 2.5   
|                                              |       |         |        |           |         |       
|Net operating earnings                        | 14.5  | 2.3     | 9.8    | 25.3      | (37.4)  | 14.5  
|                                              |       |         |        |           |         |       
|Equity in earnings of affiliate, net   of tax | 1.0   | -       | -      | -         | -       | 1.0   
|                                              |       |         |        |           |         |       
|Net income                                    | $15.5 | $ 2.3   | $9.8   | $ 25.3    | ($37.4) | $ 15.5

17

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDING JUNE 30, 2001

(In millions)



|                                                                    |        | AAG     | TOTAL  | ALL OTHER | CONS    | TOTAL  
|------------------------------------------------------------------- | ------ | ------- | ------ | --------- | ------- | -------
|                                                                    | GAFRI  | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS   
|                                                                    |        |         |        |           |         |        
|Cash Flows from Operating Activities:                               |        |         |        |           |         |        
|Net income                                                          | $23.5  | $14.8   | $9.8   | $ 36.5    | ($61.1) | $ 23.5 
|Adjustments:                                                        |        |         |        |           |         |        
|Equity in undistributed earnings     of subsidiaries and affiliates | (19.6) | (23.7)  | -      | -         | 43.3    | -      
|Increase in life, accident and     health reserves                  | -      | -       | -      | 21.5      | -       | 21.5   
|Benefits to annuity policyholders                                   | -      | -       | -      | 140.0     | -       | 140.0  
|Amortization of insurance     acquisition costs                     | -      | -       | -      | 41.1      | -       | 41.1   
|Depreciation and amortization                                       | 0.3    | 2.4     | -      | 2.1       | -       | 4.8    
|Realized losses                                                     | 1.2    | -       | -      | 23.3      | -       | 24.5   
|Increase in insurance acquisition
costs                             | -      | -       | -      | (73.5)    | -       | (73.5) 
|Other, net                                                          | 6.9    | 1.1     | -      | (33.4)    | 0.2     | (25.2) 
|                                                                    | 12.3   | (5.4)   | 9.8    | 157.6     | (17.6)  | 156.7  
|                                                                    |        |         |        |           |         |        
|Cash Flows from Investing Activities:                               |        |         |        |           |         |        
|Purchases of investments and other
assets                           | -      | -       | -      | (548.9)   | -       | (548.9)
|Maturities and redemptions of fixed
investments                     | -      | -       | -      | 234.5     | -       | 234.5  
|Sales of investments and other   assets                             | -      | -       | -      | 220.1     | -       | 220.1  
|Decrease in policy loans                                            | -      | -       | -      | 2.8       | -       | 2.8    
|                                                                    | -      | -       | -      | (91.5)    | -       | (91.5) 
|                                                                    |        |         |        |           |         |        
|Cash Flows from Financing Activities:                               |        |         |        |           |         |        
|Fixed annuity receipts                                              | -      | -       | -      | 271.8     | -       | 271.8  
|Annuity surrenders, benefits and
withdrawals                        | -      | -       | -      | (341.3)   | -       | (341.3)
|Net transfers to variable annuity
assets                            | -      | -       | -      | (1.4)     | -       | (1.4)  
|Additions to notes payable                                          | -      | 4.7     | -      | -         | -       | 4.7    
|Reductions of notes payable                                         | -      | (11.9)  | -      | (0.3)     | -       | (12.2) 
|Issuance of Common Stock                                            | 0.4    | -       | -      | -         | -       | 0.4    
|Capital contribution from parent (to
subsidiary)                    | (12.6) | 12.6    | -      | (8.0)     | 8.0     | -      
|Retirement of Common Stock                                          | (0.3)  | -       | -      | -         | -       | (0.3)  
|Trust dividend requirements                                         | -      | -       | (9.8)  | -         | 9.8     | -      
|                                                                    | (12.5) | 5.4     | (9.8)  | (79.2)    | 17.8    | (78.3) 
|                                                                    |        |         |        |           |         |        
|Net increase (decrease) in cash and
short-term investments          | (0.2)  | -       | -      | (13.1)    | 0.2     | (13.1) 
|Beginning cash and short-term investments                           | 3.2    | -       | -      | 84.5      | (0.2)   | 87.5   
|                                                                    |        |         |        |           |         |        
|Ending cash and short-term investments                              | $ 3.0  | $  -    | $ -    | $ 71.4    | $  -    | $ 74.4 

18

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

GREAT AMERICAN FINANCIAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDING JUNE 30, 2000

(In millions)



|                                                                    |       | AAG     | TOTAL  | ALL OTHER | CONS    | TOTAL  
|------------------------------------------------------------------- | ----- | ------- | ------ | --------- | ------- | -------
|                                                                    | GAFRI | HOLDING | TRUSTS | SUBS      | ENTRIES | CONS   
|                                                                    |       |         |        |           |         |        
|Cash Flows from Operating Activities:                               |       |         |        |           |         |        
|Net income                                                          | $15.5 | $ 2.3   | $9.8   | $ 25.3    | ($37.4) | $ 15.5 
|Adjustments:                                                        |       |         |        |           |         |        
|Equity in undistributed earnings     of subsidiaries and affiliates | (5.5) | (1.4)   | -      | -         | 5.9     | (1.0)  
|Increase in life, accident and     health reserves                  | -     | -       | -      | 26.2      | -       | 26.2   
|Benefits to annuity policyholders                                   | -     | -       | -      | 145.8     | -       | 145.8  
|Amortization of insurance     acquisition costs                     | -     | -       | -      | 34.0      | -       | 34.0   
|Depreciation and amortization                                       | 0.4   | 3.9     | -      | 1.2       | -       | 5.5    
|Realized (gains) losses                                             | (0.4) | -       | -      | 4.1       | -       | 3.7    
|Increase in insurance acquisition
costs                             | -     | -       | -      | (70.6)    | -       | (70.6) 
|Other, net                                                          | (2.3) | (10.0)  | -      | (9.7)     | (0.6)   | (22.6) 
|                                                                    | 7.7   | (5.2)   | 9.8    | 156.3     | (32.1)  | 136.5  
|                                                                    |       |         |        |           |         |        
|Cash Flows from Investing Activities:                               |       |         |        |           |         |        
|Purchases of investments and other
assets                           | (2.5) | -       | -      | (451.8)   | -       | (454.3)
|Maturities and redemptions of fixed
investments                     | 0.6   | -       | -      | 199.3     | -       | 199.9  
|Sales of investments and other   assets                             | 2.5   | -       | -      | 224.1     | -       | 226.6  
|Decrease in policy loans                                            | -     | -       | -      | 2.6       | -       | 2.6    
|                                                                    | 0.6   | -       | -      | (25.8)    | -       | (25.2) 
|                                                                    |       |         |        |           |         |        
|Cash Flows from Financing Activities:                               |       |         |        |           |         |        
|Fixed annuity receipts                                              | -     | -       | -      | 251.1     | -       | 251.1  
|Annuity surrenders, benefits and
withdrawals                        | -     | -       | -      | (387.6)   | -       | (387.6)
|Net transfers to variable annuity
assets                            | -     | -       | -      | (34.2)    | -       | (34.2) 
|Additions to notes payable                                          | -     | 2.0     | -      | -         | -       | 2.0    
|Reductions of notes payable                                         | (0.1) | -       | -      | (0.4)     | -       | (0.5)  
|Issuance of Common Stock                                            | 0.6   | -       | -      | -         | -       | 0.6    
|Capital contribution from parent (to
subsidiary)                    | (3.2) | 3.2     | -      | (21.7)    | 21.7    | -      
|Retirement of Common Stock                                          | (1.9) | -       | -      | -         | -       | (1.9)  
|Repurchase of trust preferred
securities                            | (1.4) | -       | -      | -         | -       | (1.4)  
|Trust dividend requirements                                         | -     | -       | (9.8)  | -         | 9.8     | -      
|                                                                    | (6.0) | 5.2     | (9.8)  | (192.8)   | 31.5    | (171.9)
|                                                                    |       |         |        |           |         |        
|Net increase (decrease) in cash and
short-term investments          | 2.3   | -       | -      | (62.3)    | (0.6)   | (60.6) 
|Beginning cash and short-term investments                           | 1.1   | -       | -      | 118.5     | -       | 119.6  
|                                                                    |       |         |        |           |         |        
|Ending cash and short-term investments                              | $ 3.4 | $  -    | $ -    | $ 56.2    | ($ 0.6) | $ 59.0 

19

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

Management's Discussion and Analysis

of Financial Condition and Results of Operations

GENERAL

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

Forward-Looking Statements

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

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

LIQUIDITY AND CAPITAL RESOURCES

RatiosGAFRI's consolidated debt to capital ratio was 22% at June 30, 2001, compared to 27% one year ago. Consolidated debt includes the Company's notes payable and its Remarketed Par Securities ("ROPES"). Capital represents the sum of consolidated debt, redeemable preferred securities of subsidiary trusts and stockholders' equity (excluding unrealized gains on marketable securities).

The National Association of Insurance Commissioners' ("NAIC") risk-based capital ("RBC") formulas determine the amount of capital that an insurance company needs to ensure that it has an acceptable expectation of not becoming financially impaired. At June 30, 2001, the capital ratio of GAFRI's principal insurance subsidiary was 4.2 times its authorized control level RBC.

20

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

Sources and Uses of Funds

In the third quarter of 2000, GAFRI paid down approximately $50 million of its bank credit line. In January 2001, the Company replaced its existing agreement with a $155 million unsecured credit agreement which matures on December 31, 2004. At June 30, 2001, GAFRI (parent) had over $100 million available under its bank credit line.

Given the current interest rate environment, GAFRI expects to redeem its ROPES in September 2001 using borrowings under the bank credit line. In May 2001, GAFRI filed to amend its shelf registration statement to provide for the issuance of up to $250 million of debt and preferred securities.

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

Investments

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

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

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

21

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

RESULTS OF OPERATIONS

General

|                                                       | Three months ended
June 30, | Six months ended
June 30,
|------------------------------------------------------ | --------------------------- | -------------------------
|GAFRI (Consolidated):                                  | 2001                        | 2000                     
|Revenues per statement of operations                   | $196.6                      | $195.9                   
|Add back realized losses                               | 22.7                        | 0.8                      
|Core operating revenues                                | 219.3                       | 196.7                    
|                                                       |                             |                          
|Expenses per statement of operations                   | 189.5                       | 202.0                    
|Less litigation charges included in
annuity benefits   | -                           | 14.2                     
|Less litigation charges included in
other expenses     | -                           | 18.3                     
|Core operating expenses                                | 189.5                       | 169.5                    
|                                                       |                             |                          
|Core operating earnings before tax                     | 29.8                        | 27.2                     
|Income tax expense                                     | 9.5                         | 7.7                      
|Net core operating earnings                            | $ 20.3                      | $ 19.5                   
|                                                       |                             |                          
|Net core operating earnings per
common share (diluted) | $ 0.47                      | $ 0.46                   

Retirement Products

|Three months ended                    | Six months ended
|------------------------------------- | ----------------
|June 30,                              | June 30,        
|                                      | 2001            
|Annuity Premiums                      |                 
|Single premium fixed rate annuities   | $ 96            
|Flexible premium fixed rate annuities | 41              
|Single premium variable annuities     | 23              
|Flexible premium variable annuities   | 24              
|                                      | $184            

Sales of annuity products linked to the performance of the stock market (variable and equity-indexed annuities) were down substantially in the second quarter and first six months of 2001 compared to the same periods in 2000. Management believes this decrease was attributable to the volatile equity markets.



22

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              | Six months ended
|------------------------------- | ----------------
|June 30,                        | June 30,        
|                                | 2001            
|Premiums                        |                 
|Supplemental insurance products | $49             
|GA Life of Puerto Rico          | 13              
|Life products                   | 9               
|                                | $71             
|                                |                 
|Benefits                        |                 
|Supplemental insurance products | $40             
|GA Life of Puerto Rico          | 7               
|Life products                   | 5               
|                                | $52             

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

Real Estate Operations

|Three months ended | Six months ended
|------------------ | ----------------
|June 30,           | June 30,        
|                   | 2001            
|Other income       | $11.2           
|Other expenses     | 7.6             

Other income included a pretax gain on the sale of real estate assets of $2.1 million in the second quarter of 2001 and $10.6 million in the first six months of 2001.

Other Income

Realized Losses

Annuity Benefits

On its deferred annuities (annuities in the accumulation phase), GAFRI generally credits interest to policyholders' accounts at their current stated "surrender" interest rates. Furthermore, for "two-tier" deferred annuities (annuities under which a higher interest amount can be earned if a policy is annuitized rather than

23

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

surrendered), GAFRI accrues an additional liability to provide for expected deaths and annuitizations. Changes in crediting rates, actual surrender and annuitization experience or modifications in actuarial assumptions can affect this accrual.

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

Insurance Acquisition Expenses

Interest and Other Debt Expenses

Other Expenses

Equity in Earnings of Affiliate

Recent Accounting Standards

24

GREAT AMERICAN FINANCIAL RESOURCES, INC. 10-Q

PART II

OTHER INFORMATION

Item 3

Quantitative and Qualitative Disclosure at Market Risk

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

Item 4

Submission of Matters to a Vote of Security Holders

The Registrant's Annual Stockholders' Meeting was held May 23, 2001. Proxies were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934. All of the nominees for director proposed by the Registrant were elected to the board of Directors.

In addition to the election of directors, stockholders (representing approximately 95% of the voting shares) also voted to approve an amendment to the GAFRI 1994 Stock Option Plan to increase the maximum number of options to be granted from 3,000,000 to 4,000,000 [Proposal 2.]

The votes cast for, against, and the number withheld or abstentions as to each matter voted on at the 2001 Annual Meeting is set forth below:

|                       | For        | Against | Withheld/Abstain
|---------------------- | ---------- | ------- | ----------------
|Election of Directors: |            |         |                 
|Carl H. Lindner        | 40,892,299 | NA      | 36,955          
|S. Craig Lindner       | 40,738,731 | NA      | 190,523         
|Robert A. Adams        | 40,719,395 | NA      | 209,859         
|Ronald G. Joseph       | 40,910,500 | NA      | 18,754          
|John T. Lawrence       | 40,911,259 | NA      | 17,995          
|William R. Martin      | 40,909,528 | NA      | 19,726          
|Ronald W. Tysoe        | 40,909,667 | NA      | 19,587          
|                       |            |         |                 
|Proposal 2             | 40,259,277 | 662,630 | 7,347           
|________________       |            |         |                 
|NA - Not Applicable    |            |         |                 

Item 6

Exhibits and Reports on Form 8-K

(a)  Exhibits:  none

(b)  Reports on Form 8-K:  none

Signature

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

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

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