SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C.  20549


                                    FORM 10-Q


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


   For the Quarterly Period Ended                              Commission File
   September 30, 1996                                          No. 1-11632



                           AMERICAN ANNUITY GROUP, INC.



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



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







   Indicate by check mark whether the Registrant (1) has filed all reports
   required to be filed by Section 13 or 15(d) of the Securities Exchange Act
   of 1934 during the preceding 12 months, and (2) has been subject to such
   filing requirements for the past 90 days.  Yes   X       No      




   As of November 1, 1996, there were 43,081,464 shares of the Registrant's
   Common Stock outstanding.  





                                   Page 1 of 19



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

                  AMERICAN ANNUITY GROUP, INC. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEET
                              (Dollars in millions)

                                                  September 30,December 31,
                                                          1996        1995 
   ASSETS
     Investments:
       Fixed maturities:
         Held to maturity - at amortized cost 
          (market - $2,524.1 and $2,600.0)            $2,521.4    $2,497.2 
         Available for sale - at market
          (amortized cost - $3,133.1 and $2,787.6)     3,156.7     2,926.6 
       Equity securities - at market (cost - $13.2
         and $14.1)                                       42.0        32.6 
       Investment in affiliate                            21.1        20.3 
       Mortgage loans on real estate                      71.5        70.4 
       Real estate                                        37.1        39.9 
       Policy loans                                      247.2       241.4 
       Short-term investments                             30.0       140.7 
         Total investments                             6,127.0     5,969.1 

     Cash                                                 27.1        28.7 
     Accrued investment income                            97.0        87.4 
     Unamortized insurance acquisition costs, net        182.3       149.8 
     Other assets                                        160.2       137.5 
     Assets held in separate accounts                    243.3       238.5 

         Total assets                                 $6,836.9    $6,611.0 


   LIABILITIES AND STOCKHOLDERS' EQUITY
     Annuity benefits accumulated                     $5,279.2    $5,052.0 
     Life, accident and health reserves                  561.1       538.3 
     Notes payable                                       159.5       167.7 
     Payable to affiliates, net                           29.1        29.1 
     Deferred taxes on unrealized gains                   17.0        48.0 
     Accounts payable, accrued expenses and other
       liabilities                                       134.7       108.1 
     Liabilities related to separate accounts            243.3       238.5 
         Total liabilities                             6,423.9     6,181.7 

     Series B Preferred Stock (at redemption value)       17.0        17.0 
     Common Stock, $1 par value
       -100,000,000 shares authorized
       - 43,077,301 and 43,071,882 shares outstanding     43.1        43.1 
     Capital surplus                                     360.5       361.1 
     Accumulated deficit at December 31, 1992           (212.6)     (212.6)
     Retained earnings since January 1, 1993             173.5       131.4 
     Unrealized gain on marketable securities, net of
       deferred income taxes and insurance adjustments    31.5        89.3 
         Total stockholders' equity                      413.0       429.3 

         Total liabilities and stockholders' equity   $6,836.9    $6,611.0 




                                        2



                        AMERICAN ANNUITY GROUP, INC. 10-Q

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


                                                 Three                Nine     
                                             months ended        months ended 
                                             September 30,       September 30,
                                             1996    1995       1996     1995 
   Revenues:
     Net investment income                 $119.4  $102.3    $347.0     $297.1
     Realized gains on sales of
       investments                            0.5     6.9       1.4        7.0
     Life, accident and health premiums      24.8     0.4      80.3        1.6
     Equity in net earnings (losses) of
       affiliate                             (0.6)   (0.7)      2.2        2.2
     Other income                             1.8     0.5       4.9        1.3
                                            145.9   109.4     435.8      309.2
   Costs and Expenses:
     Annuity benefits                        69.5    65.7     206.3      194.2
     Life, accident and health benefits      21.7     0.2      70.2        1.3
     Amortization of insurance acquisition
       costs                                  6.9     2.6      21.1        6.2
     Interest and other debt expenses         3.4     4.3      11.4       13.4
     Other expenses                          18.9    11.0      53.3       32.1
                                            120.4    83.8     362.3      247.2

   Income before taxes and
       extraordinary item                    25.5    25.6      73.5       62.0
   Provision for income taxes                 8.4     9.0      25.4       21.8

   Income before extraordinary item          17.1    16.6      48.1       40.2

   Extraordinary item - loss on
       prepayment of debt                    (1.7)     -       (6.0)        - 

   Net Income                               $15.4   $16.6     $42.1      $40.2


     Preferred dividend requirement           0.4      -        1.1         - 

     Net income applicable to Common Stock  $15.0   $16.6     $41.0      $40.2

     Average common shares outstanding       43.1    40.8      43.1       39.7


   Earnings (loss) per common share:
     Continuing operations                  $0.39   $0.41     $1.09      $1.01
     Extraordinary item                     (0.04)     -      (0.14)        - 
     Net income                             $0.35   $0.41     $0.95      $1.01










                                        3



                        AMERICAN ANNUITY GROUP, INC. 10-Q

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

                                                   Nine months ended  
                                                      September 30, 
                                                      1996       1995 
   Preferred Stock:
     Balance at beginning and end of period         $ 17.0     $   -  


   Common Stock:
     Balance at beginning of period                 $ 43.1     $ 39.1 
     Issued during the period                           -         4.0 
       Balance at end of period                     $ 43.1     $ 43.1 
    

   Capital Surplus:
     Balance at beginning of period                 $361.1     $330.8 
     Common Stock issuance                             0.1       33.3 
     Preferred dividends declared                     (0.7)        -  
       Balance at end of period                     $360.5     $364.1 


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


   Retained Earnings Since January 1, 1993:
     Retained earnings from January 1, 1993 to
       beginning of period                          $131.4     $ 76.1 
     Net income                                       42.1       40.2 
       Balance at end of period                     $173.5     $116.3 


   Unrealized Gains (Losses), Net:
     Balance at beginning of period                 $ 89.3    ($ 29.0)
     Change during period                            (57.8)      68.4 
       Balance at end of period                     $ 31.5     $ 39.4 






















                                        4



                        AMERICAN ANNUITY GROUP, INC. 10-Q

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

                                                         Nine months ended  
                                                            September 30,     
                                                          1996        1995 
   Cash Flows from Operating Activities:
     Net income                                         $ 42.1      $ 40.2 
     Adjustments:
       Extraordinary losses on retirement of debt          6.0          -  
       Increase (decrease) in life, accident and
         health reserves                                  22.8        (0.1)
       Benefits to annuity policyholders                 206.3       194.2 
       Amortization of insurance acquisition costs        21.1         6.2 
       Equity in net earnings of affiliate                (2.2)       (2.2)
       Depreciation and amortization                       3.9         2.4 
       Realized gains on investing activities             (1.4)       (7.0)
       Increase in accrued investment income              (9.6)       (9.1)
       Increase in insurance acquisition costs           (46.9)      (24.8)
       Increase in other assets                           (4.4)       (1.5)
       Increase (decrease) in other liabilities           (4.8)        8.4 
       Other, net                                         (5.3)        1.3 
                                                         227.6       208.0 

   Cash Flows from Investing Activities:
     Purchases of and additional investments in:
       Fixed maturity investments                       (759.4)     (743.5)
       Real estate, mortgage loans and other assets      (21.7)      (15.7)
     Maturities and redemptions of fixed maturity
       investments                                       195.1       106.5 
     Sales of:
       Fixed maturity investments                        207.9       407.7 
       Equity securities                                   1.2         1.6 
       Real estate, mortgage loans and other assets       21.1         5.2 
     Increase in policy loans                             (5.8)      (16.9)
                                                        (361.6)     (255.1)

   Cash Flows from Financing Activities:
     Annuity receipts                                    410.2       338.3 
     Annuity surrenders, benefits and withdrawals       (372.0)     (302.5)
     Additions to notes payable                           82.2        13.0 
     Reductions of notes payable                         (98.1)      (46.4)
     Issuance of common stock                              0.1        37.3 
     Cash dividends paid                                  (0.7)         -  
                                                          21.7        39.7 

   Net decrease in cash and short-term investments      (112.3)       (7.4)

   Cash and short-term investments at beginning
     of period                                           169.4        62.7 
   Cash and short-term investments at end of period     $ 57.1      $ 55.3 








                                        5



                        AMERICAN ANNUITY GROUP, INC. 10-Q

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


   A. Description of the Company

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

      AAG's parent, American Financial Corporation ("AFC"), was acquired by
      American Financial Group, Inc. ("AFG") in April 1995.  AFG and its
      subsidiaries owned 35,059,995 shares (81%) of AAG's Common Stock at
      November 1, 1996.

   B. Accounting Policies

      Basis of Presentation  The accompanying consolidated financial
      statements for AAG and its subsidiaries are unaudited, but management
      believes that all adjustments (consisting only of normal recurring
      accruals unless otherwise disclosed herein) necessary for fair
      presentation have been made.  The results of operations for interim
      periods are not necessarily indicative of results to be expected for the
      year.  The financial statements have been prepared in accordance with
      the instructions to Form 10-Q and therefore do not include all
      information and footnotes necessary to be in conformity with generally
      accepted accounting principles.  Certain reclassifications have been
      made to prior periods to conform to the current year's presentation.

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

      AAG's acquisition of Laurentian Capital Corporation ("LCC") in November
      1995 was recorded as a purchase.  The results of LCC's operations have
      been included in AAG's consolidated financial statements since its
      acquisition.

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

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

      Gains or losses on sales of securities are recognized at the time of
      disposition with the amount of gain or loss determined on the specific
      identification basis.  When a decline in the value of a specific
      investment is considered to be other than temporary, a provision for
      impairment is charged to earnings and the carrying value of that 



                                        6



                        AMERICAN ANNUITY GROUP, INC. 10-Q

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


      investment is reduced.  Premiums and discounts on mortgage-backed
      securities are amortized over their expected average lives using the
      interest method.

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

      Insurance Acquisition Costs  Unamortized insurance acquisition costs
      consist primarily of deferred policy acquisition costs and the present
      value of future profits of acquired companies.  Amortization of life
      insurance acquisition costs includes first year commissions to the
      extent they exceed those on annual renewals.

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

      Deferred costs related to annuities and universal life insurance
      products are 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.

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

      To the extent that realized gains and losses result in adjustments to
      the amortization of DPAC, such adjustments are reflected as components
      of realized gains.

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

      Present Value of Future Profits  Included in insurance acquisition costs
      are amounts representing the present value of future profits on business
      in force of the acquired insurance companies, which represent the
      portion of the costs to acquire such companies that is allocated to the
      value of the right to receive future cash flows from insurance contracts
      existing at the date of acquisition.  These amounts are amortized with
      interest over the estimated remaining life of the acquired policies for
      annuities and universal life products and over the expected premium
      paying period for traditional life and health insurance products.



                                        7



                        AMERICAN ANNUITY GROUP, INC. 10-Q

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


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

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

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

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

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

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

      Income Taxes  AAG, Great American Life Insurance Company ("GALIC") and
      all other 80%-owned U.S. non-life subsidiaries are consolidated with AFC
      for federal income tax purposes.  AAG's other life insurance
      subsidiaries will file separate federal income tax returns through the
      fifth year from their acquisition or formation.

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



                                        8



                        AMERICAN ANNUITY GROUP, INC. 10-Q

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


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

      Benefit Plans  AAG sponsors an Employee Stock Ownership Retirement Plan
      ("ESORP") covering all employees who are qualified as to age and length
      of service.  The ESORP, which invests primarily in securities of AAG, is
      a trusteed, noncontributory plan for the benefit of the employees of AAG
      and its subsidiaries.  Contributions are discretionary by the directors
      of AAG and are charged against earnings in the year for which they are
      declared.  Qualified employees having vested rights in the plan are
      entitled to benefit payments at age 60.

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

      Debt Issuance Costs  Debt expenses are amortized over the terms of the
      respective borrowings on the interest method.

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

   C. 1995 Acquisition

      In November 1995, AAG acquired all of the outstanding shares of LCC. 
      Its principal insurance subsidiaries were American Memorial Life
      Insurance Company and Loyal American Life Insurance Company.

      AAG paid approximately $106 million for the outstanding common stock of
      LCC and repaid $45 million of LCC indebtedness concurrently with the
      acquisition.  GALIC provided approximately $90 million of the purchase
      price in exchange for American Memorial and Loyal.  AAG funded the
      balance of the cost of acquiring LCC with the proceeds from a Common
      Stock rights offering completed in August 1995, borrowings under its
      line of credit, and cash on hand.




                                        9



                        AMERICAN ANNUITY GROUP, INC. 10-Q

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


   D. Investments

      The carrying value of AAG's fixed maturity portfolio was comprised of
      the following at September 30, 1996:
                                          Held to  Available 
                                         Maturity   for Sale  Total  
         U. S. Government and government
           agencies and authorities            0%       3%       3%  
         Public utilities                      7        3       10   
         Mortgage-backed securities           12       21       33   
         All other corporate                  26       28       54   
                                              45%      55%     100%  

       "Investing activities" related to fixed maturity investments in AAG's
       Statement of Cash Flows for the nine months ending September 30,
       consisted of the following (in millions):
                                          Held to  Available 
                                         Maturity   for Sale  Total  
         1996
         Purchases                         ($103.9) ($655.5) ($759.4)
         Maturities and paydowns              81.3    113.8    195.1 
         Sales                                 9.3    198.6    207.9 

         1995
         Purchases                         ($206.9) ($536.6) ($743.5)
         Maturities and paydowns              41.9     64.6    106.5 
         Sales                                 6.2    401.5    407.7 

       Securities classified as "held to maturity" having an amortized cost of
       $9.5 million and $6.3 million were sold in the first nine months of
       1996 and 1995, respectively, due to significant deterioration in the
       issuers' creditworthiness.

   E.  Investment in Affiliate

       Investment in affiliate (carrying value of $21.1 million at September
       30, 1996) reflects AAG's 5% ownership (2.7 million shares) of the
       common stock of Chiquita Brands International which is accounted for
       under the equity method.  AFG and its other subsidiaries own an
       additional 38% interest in the common stock of Chiquita.  Chiquita is a
       leading international marketer, processor and producer of quality food
       products.  The market value of AAG's investment in Chiquita was
       approximately $32.7 million at September 30, 1996.  

   F.  Unamortized Insurance Acquisition Costs

       Unamortized insurance acquisition costs consisted of the following (in
       millions):
                                            September 30, December 31, 
                                                     1996         1995 
           Deferred policy acquisition costs       $266.8       $228.2 
           Present value of future 
             profits acquired                        68.9         73.4 
           Unearned revenues                       (153.4)      (151.8)
                                                   $182.3       $149.8 


                                        10



                        AMERICAN ANNUITY GROUP, INC. 10-Q

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


   G.   Notes Payable

        Notes payable consisted of the following (in millions):

                                            September 30, December 31, 
                                                     1996         1995 
           Direct obligations of AAG:
             11-1/8% Senior Subordinated Notes due
               February 2003*                      $ 24.1       $101.4 
             9-1/2% Senior Notes due August 2001*    40.9         41.5 
             Bank Credit Line due September 1999*    74.7         20.5 
             Unsecured Bank Credit Line due
               January 1997*                         14.5           -  
             Other                                    1.2           -  
           Subsidiary debt                            4.1          4.3 
                Total                              $159.5       $167.7 
                        
        * Assumed by AAG Holding Company on November 1, 1996.

        In the first three quarters of 1996, the Company repurchased $77.9
        million principal amount of its Notes (including $21.3 million
        purchased by GALIC) realizing a pretax extraordinary loss of
        approximately $8.2 million.

        AAG has a $75 million revolving credit agreement with four banks. 
        Loans under the credit agreement bear interest at floating rates based
        on prime or Eurodollar rates and are collateralized by 25% of the
        Common Stock of GALIC.  In 1996, AAG obtained a $40 million unsecured
        bank line of credit under terms similar to its existing credit line. 
        At September 30, 1996 and December 31, 1995, the weighted average rate
        on the bank credit lines was 6.46% and 6.83%, respectively.  The
        Company expects to expand and extend its unsecured credit line.

        On November 7, 1996, AAG Holding repaid $50 million of its bank lines
        using proceeds from the issuance of preferred securities.  (See Note K
        to Consolidated Financial Statements.)

        Scheduled principal payments on debt for the balance of 1996 and the
        subsequent five years, adjusted to reflect the November 1996 paydowns,
        are shown below (in millions).  The scheduled principal payments assume
        that Notes purchased are applied to the earliest scheduled retirements. 


                           AAG Holding    Other      Total
                1996           $  -        $0.1      $ 0.1
                1997            10.5        0.7       11.2
                1998              -         0.7        0.7
                1999            34.2        0.8       35.0
                2000              -         0.8        0.8
                2001            40.8        0.6       41.4







                                        11



                        AMERICAN ANNUITY GROUP, INC. 10-Q

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


   H.        Stockholders' Equity

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

             On December 28, 1995, AAG sold 170,000 shares of newly issued
             Series B Preferred Stock to an affiliate for $17 million.  The
             Series B Preferred Stock has a redemption value of $100 per share
             and is redeemable at AAG's option.  Dividends are cumulative and
             payable quarterly (beginning April 1, 1996) at an annual rate of
             $8.50 per share.

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

   I.        Contingencies

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

             In 1991, the Company identified possible deficiencies in
             procedures for reporting quality assurance information to the
             Defense Electronics Supply Center with respect to the Company's
             former manufacturing operations.  Over the last several years, the
             Company has been engaged in negotiations with the United States
             Government with respect to the settlement of claims the Government
             might have arising out of the reporting deficiencies.  In March
             1995, the Company received notification of additional alleged
             reporting deficiencies and based on management's evaluations
             additional reserves were established.  The Company believes it has
             sufficient reserves to cover the estimated settlement amount.




                                        12



                        AMERICAN ANNUITY GROUP, INC. 10-Q

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


   J.        Statutory Information

             Insurance companies are required to file financial statements with
             state insurance regulatory authorities prepared on an accounting
             basis prescribed or permitted by such authorities (statutory
             basis).  Certain statutory amounts for GALIC were as follows (in
             millions):

                                        September 30, December 31,
                                                1996         1995 
                Policyholders' surplus        $277.8       $272.8 
                Asset valuation reserve         88.1         90.2 
                Interest maintenance reserve    26.7         32.2 

                                           Nine months ended September 30,
                                                1996         1995 
                Net gain from operations      $ 50.1       $ 44.0 
                Net income                      48.0         42.4 

             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, statutory net gain from
             operations and statutory net income.  Based on net gain from
             operations at December 31, 1995, GALIC may pay approximately $58.6
             million in dividends in 1996 without prior approval, according to
             the most restrictive dividend requirements of GALIC's domiciliary
             states.  In the first three quarters of 1996, AAG received $39.1
             million in capital distributions from GALIC.

   K.        Subsequent Events

             In connection with the anticipated establishment of a new
             unsecured line of credit, the Company transferred all the
             outstanding stock of GALIC to AAG Holding Company, Inc., a wholly-
             owned subsidiary of the Company, on November 1, 1996.  In
             connection with that transaction, AAG Holding assumed all of the
             Company's obligations under the 9-1/2% Senior Notes due 2001, 11-
             1/8% Senior Subordinated Notes due 2003, and the bank lines of
             credit.  The Company has guaranteed the obligations of AAG Holding
             under this indebtedness.

             In November 1996, a wholly-owned trust subsidiary of AAG Holding
             issued three million units of 9-1/4% Trust Originated Preferred
             Securities ("TOPrS") for $75 million in cash.  The Trust then
             purchased $75 million of newly issued AAG Holding 9-1/4%
             Subordinated Debentures due 2026, which, along with related
             interest and principal payments received, will be the only assets
             of the Trust.  AAG Holding used the proceeds from this transaction
             to retire $50 million of outstanding bank debt and the remainder
             for general corporate purposes, which may include the retirement
             of additional debt and investment in insurance businesses.

             Holders of the TOPrS are entitled to receive quarterly cash
             distributions of  $0.58 per unit.  Payment dates and amounts for
             the TOPrS correspond to those on the Subordinated Debentures.  The
             TOPrS are mandatorily redeemable upon maturity or redemption of
             the Subordinated Debentures.  The Subordinated Debentures are
             redeemable by AAG Holding on or after November 7, 2001. 

             Distribution and redemption payments on the TOPrS are guaranteed
             by AAG Holding to the extent the Trust has funds available
             therefor.



                                        13



                        AMERICAN ANNUITY GROUP, INC. 10-Q

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


   GENERAL

   American Annuity Group, Inc. ("AAG" or "the Company") and AAG Holding
   Company, Inc. ("AAG Holding") are organized as holding companies with nearly
   all of their operations being conducted by their subsidiaries.  The parent
   corporations, however, have continuing expenditures for administrative
   expenses, corporate services, liabilities in connection with discontinued
   operations and for the payment of interest and principal on borrowings and
   shareholder dividends.

   Since its business is financial in nature, AAG does not prepare its
   consolidated financial statements using a current-noncurrent format. 
   Consequently, certain traditional ratios and financial analysis tests are
   not meaningful.

   LIQUIDITY AND CAPITAL RESOURCES  

   Ratios  AAG's ratio of earnings to fixed charges was 6.9 for the first nine
   months of 1996 compared to 5.4 for the first nine months of 1995; the ratio
   of earnings to fixed charges and preferred dividends was 6.1 for the first
   nine months of 1996.  The ratio of AAG's consolidated debt to equity,
   excluding the effects of unrealized gains and losses on stockholders'
   equity, was .42 at September 30, 1996, compared to .49 at December 31, 1995
   and .79 at December 31, 1994.  These same ratios including the effects of
   unrealized gains and losses were .39, .39, and .90, respectively.  

   The National Association of Insurance Commissioners' ("NAIC") risk-based
   capital ("RBC") formulas determine the amount of capital that an insurance
   company needs to ensure that it has an acceptable expectation of not
   becoming financially impaired.  At September 30, 1996, the capital ratios of
   each of AAG's insurance subsidiaries exceeded the RBC requirements by
   substantial amounts.

   Sources and Uses of Funds  On November 7, 1996, a wholly-owned trust
   subsidiary of AAG Holding raised $75 million in cash from the issuance of
   preferred securities.  The Company used $50 million of the proceeds to
   retire bank debt; the remainder is available for general corporate purposes.

   In 1994, management concluded that the Company would benefit from a
   reduction in total indebtedness and the resulting reduction in debt service
   requirements.  The perceived benefits included (i) the ability to retain
   cash to be utilized to expand the Company's operations, and (ii) the
   prospect for better ratings for the Company's insurance subsidiaries.  As a
   result, AAG began to acquire its outstanding indebtedness, primarily through
   privately negotiated transactions.  In 1996 (through November 8), the
   Company repurchased $57 million principal amount of its Notes for $61
   million; an additional $21 million was purchased by GALIC for $23 million. 
   Funds for these retirements came from bank borrowings and cash on hand.

   As of November 8, 1996, AAG Holding had approximately $70 million available
   under its bank lines of credit.  AAG Holding expects to expand and extend
   its credit lines in the near future.

   In September 1996, three nationally recognized rating agencies upgraded
   their ratings on AAG public debentures.  The senior debt is now rated
   investment grade by all three agencies and the subordinated debt is rated
   investment grade by two of the agencies.  Additionally, two of the agencies
   gave the TOPrS, issued in November 1996, an investment grade rating as well.



                                        14



                        AMERICAN ANNUITY GROUP, INC. 10-Q

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



   The November 1995 acquisition of Laurentian Capital Corporation ("LCC") was
   funded primarily with internal funds supplemented by bank borrowings and the
   proceeds of a common stock offering in August.

   In December 1995, AAG sold $17 million of newly issued 8.5% Series B
   Preferred Stock to a subsidiary of AFG.  The proceeds from the sale were
   contributed to GALIC.  AAG expects to sell additional Preferred Stock to AFG
   or its subsidiary in December 1996.

   The ability of AAG and AAG Holding to pay interest and principal on debt,
   dividends on preferred stock, obligations related to the Company's
   discontinued manufacturing operations and other holding company costs is
   dependent on payments from GALIC in the form of capital distributions and
   income tax payments.  In the first nine months of 1996, AAG received $55.6
   million in such payments from GALIC.

   The amount of capital distributions which can be paid by GALIC is subject to
   restrictions relating to statutory surplus and earnings.  In addition, any
   dividend or distribution paid from other than earned surplus is considered
   an extraordinary dividend and may be paid only after regulatory approval. 
   The maximum amount of dividends payable by GALIC in 1996 without prior
   regulatory approval is $58.6 million.

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

   Investments  Insurance laws restrict the types and amounts of investments
   which are permissible for life insurers.  These restrictions are designed to
   ensure the safety and liquidity of insurers' investment portfolios.  The
   NAIC is still considering the formulation of a model investment law.  The
   formulation is in the preliminary stages and management believes its impact
   on AAG's operations will not be material.

   The NAIC assigns quality ratings to publicly traded as well as privately
   placed securities.  These ratings range from Class 1 (highest quality) to
   Class 6 (lowest quality).  The following table shows the Company's bond
   portfolio by NAIC designation (and comparable Standard & Poor's Corporation
   rating) as of September 30, 1996:

         NAIC                                       % of Total 
         Rating  Comparable S&P Rating             Market Value
            1    AAA, AA, A                               66%  
            2    BBB                                      28   
                      Total investment grade              94   
            3    BB                                        3   
            4    B                                         3   
            5    CCC, CC, C                                *   
            6    D                                         *   
                      Total non-investment grade           6   
                      Total fixed maturities             100%  
                         
         * less than 1%


                                        15



                        AMERICAN ANNUITY GROUP, INC. 10-Q

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


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

   AAG invests primarily in fixed income investments which, including loans and
   short-term investments, comprised over 98% of its investment portfolio at
   September 30, 1996.  AAG generally invests in securities with intermediate-
   term maturities with an objective of optimizing interest yields while
   maintaining an appropriate relationship of maturities between AAG's assets
   and expected liabilities.

   At September 30, 1996, AAG had approximately $26 million in net unrealized
   gains on its fixed maturity portfolio compared to net unrealized gains of
   $242 million at December 31, 1995.  This decrease, representing
   approximately 4% of the carrying value of AAG's fixed maturity portfolio,
   resulted from an increase in the general level of interest rates.

   At September 30, 1996, AAG had less than 2% of total assets invested in
   mortgage loans and real estate.  The majority of mortgage loans and real
   estate was purchased within the last three years.

   At September 30, 1996, AAG's mortgage-backed securities ("MBSs") portfolio
   represented approximately one-third of fixed maturity investments.  As of
   September 30, 1996, interest only (I/O), principal only (P/O) and other
   "high risk" MBSs represented less than eight-tenths of one percent of total
   assets.  AAG invests primarily in MBSs which have a reduced risk of
   prepayment.  In addition, the majority of MBSs held by AAG were purchased at
   a discount.  Management believes that the structure and discounted nature of
   the MBSs will minimize the effect of prepayments on earnings over the
   anticipated life of the MBS portfolio.

   Approximately 90% of AAG's MBSs are rated "AAA" with substantially all being
   of investment grade quality.  The majority are collateralized by GNMA, FNMA
   and FHLMC single-family residential pass-through certificates.  The market
   in which these securities trade is highly liquid.  Aside from interest rate
   risk, AAG does not believe a material risk (relative to earnings or
   liquidity) is inherent in holding such investments.

   RESULTS OF OPERATIONS  

   General  The operations of American Memorial and Loyal are included in AAG's
   financial statements from the date of their acquisition in November 1995. 
   Accordingly, the first nine months 1996 and 1995 income statement components
   are not comparable.  Results of interim periods are not necessarily
   indicative of future results of operations.



                                        16



                        AMERICAN ANNUITY GROUP, INC. 10-Q

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


   GALIC's principal products are Flexible Premium Deferred Annuities ("FPDAs")
   and Single Premium Deferred Annuities ("SPDAs").  American Memorial offers a
   variety of annuity products to finance pre-arranged funerals.  The following
   table summarizes AAG's annuity premiums (in millions):                  

                                            Three            Nine     
                                         months ended     months ended 
                                         September 30,    September 30,
                                          1996   1995      1996   1995
             GALIC:
               FPDAs - first year         $  7   $  9      $ 26   $ 33
               FPDAs - renewal              33     37       134    145
               SPDAs                        81     47       223    160
                                           121     93       383    338
             American Memorial              10     -         29     - 
                                          $131   $ 93      $412   $338

   The increase in GALIC's sales of SPDAs reflects the addition of two Managing
   General Agencies that wrote approximately one-fifth of GALIC's total annuity
   premiums for the nine months ended September 30, 1996.

   Pretax Operating Earnings  Pretax earnings from operations (before realized
   gains) for the third quarter and first nine months of 1996 were $25.0
   million and $72.1 million, respectively, compared to $18.7 million and $55.0
   million for the same periods in 1995.  The improvement in 1996 can be
   attributed to the growth in invested assets, including the increase due to
   the acquisition of American Memorial and Loyal.

   Life, Accident and Health Premiums and Benefits  Revenues and expenses
   reflect the acquisition of American Memorial and Loyal.

   Net Investment Income  Net investment income increased 17% in both the third
   quarter and first nine months of 1996 compared to the same periods in 1995
   due to an increase in the Company's average fixed maturity investment base. 
   Investment income is reflected net of investment expenses of $4.9 million in
   1996 and $3.8 million in 1995.

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

   Equity in Net Earnings (Losses) of Affiliate  Equity in net earnings
   (losses) of affiliate represents AAG's proportionate share of Chiquita's
   earnings.  Chiquita reported a net loss before extraordinary item for the
   third quarter of 1996 and 1995 of $7.6 million and $11.0 million,
   respectively.  Net income before extraordinary item for the first nine
   months of 1996 and 1995 was $59.7 million and $60.8 million, respectively.
    
   Annuity Benefits  Annuity benefits reflect primarily interest credited to
   annuity policyholders' funds accumulated.  GALIC's fixed rate annuity
   products permit GALIC to change the crediting rate at any time (subject to
   minimum interest rate guarantees of 3% or 4% per annum).  As a result,
   management has been able to react to changes in market interest rates and
   maintain a desired interest rate spread 


                                        17



                        AMERICAN ANNUITY GROUP, INC. 10-Q

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


   without a substantial effect on persistency.  Annuity benefits increased 6%
   in both the third quarter and first nine months of 1996 compared to the
   respective periods in 1995 due primarily to an increase in average annuity
   benefits accumulated.

   Amortization of Insurance Acquisition Costs  Amortization of insurance
   acquisition costs increased to $21.1 million in the first nine months of
   1996 from $6.2 million in the first nine months of 1995 due to the
   acquisition of LCC.

   Interest and Other Debt Expenses  Interest on borrowings decreased 21% in
   the third quarter and 15% in the first nine months of 1996 compared to the
   same periods in 1995 due to repurchases of debt during 1996 and 1995, as
   well as lower rates on AAG's credit facilities which were used to finance
   repurchases of higher cost debt.

   Other Expenses  Other expenses increased in the third quarter and first nine
   months of 1996 compared to the same periods in 1995 reflecting the operating
   and general expenses of American Memorial and Loyal as well as additional
   costs relating to expanded distribution networks.

   Extraordinary Item  Extraordinary item reflects AAG's losses ($5.3 million
   net of tax) on retirements of its debt during the first nine months of 1996
   and AAG's proportionate share of Chiquita's extraordinary loss ($0.7 million
   net of tax) on the retirement of certain of its debt.


                                      18  



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

                                      ITEM 6

                         Exhibits and Reports on Form 8-K


   (a) Exhibit 27 - Financial Data Schedule as of September 30, 1996.  For
       submission in electronic filing only.

   (b) Report on Form 8-K - None.


                                    Signature


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


                                      American Annuity Group, Inc.



   November 13, 1996                  BY:William J. Maney
                                         Senior Vice President, Treasurer
                                           and Chief Financial Officer




                                        19