<PAGE>

                                                                    Exhibit 10.1

                                                                DRAFT OF 1/10/03

                       FORMATION AND SEPARATION AGREEMENT

                                     BETWEEN

                       AMERICAN PREMIER UNDERWRITERS, INC.

                                       AND

                   INFINITY PROPERTY AND CASUALTY CORPORATION

                        DATED AS OF _______________, 2002
<PAGE>
                       FORMATION AND SEPARATION AGREEMENT

      THIS FORMATION AND SEPARATION AGREEMENT (this "AGREEMENT") is made and
entered into as of December 31, 2002, between AMERICAN PREMIER UNDERWRITERS,
INC., an Ohio corporation ("APU"), and INFINITY PROPERTY AND CASUALTY
CORPORATION, an Ohio corporation (the "Company").

                                    RECITALS

      APU has sponsored the formation of the Company and in connection
therewith:


      A     APU will transfer to the Company, all of the issued and outstanding
            capital stock of each of the NSA Insurance Subsidiaries (as defined
            below) in exchange for all issued and outstanding common shares, no
            par value per share (the "Common Shares"), of the Company and a note
            payable to APU in the amount of $55 million and in the form attached
            hereto as Exhibit A (the "APU Note").


      B.    Great American Insurance Company, including certain of its
            subsidiaries, shall transfer to the Company its personal insurance
            business written through independent agents.

      C.    The Company has filed a registration statement under the Securities
            Act (as defined below) for the purpose of selling a portion of the
            Common Shares owned by APU (the "Public Offering").

      D.    The Company has filed a registration statement under the Securities
            Act for the purpose of offering for sale to the public $180 million
            in principal amount of senior notes (the "Senior Note Offering").

      E.    APU and the Company wish to provide for certain transactions to be
            entered into in connection with the formation of the Company and the
            Public Offering and to set forth herein certain arrangements that
            will govern the relationship between APU, the Company and their
            respective Affiliates (as defined below).

      NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, the sufficiency of which is acknowledged, the
parties hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

      Section 1.1. Definitions. As used in this Agreement, the following terms
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
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                                      -2-

      "ACTION" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.

      "AFFILIATE" of any Person or entity means any Person which, directly or
indirectly, controls, is under common control with, or is controlled by, such
Person.

      "AFG" means American Financial Group, Inc., an Ohio corporation.

      "ANCILLARY AGREEMENTS" means the Reinsurance Agreement, Registration
Rights Agreement, Investment Advisory Agreement, Services Agreement,
Noncompetition Agreement, Tax Allocation Indemnification Agreement, License
Agreement and Sublease Agreement in each case as defined and described in more
detail in Section 3.1 hereof.

      "ASSUMED AGENCY BUSINESS" means the personal insurance business written by
Great American Insurance Company and its wholly-owned subsidiaries through
independent agents and which will be transferred to the Company under the
Reinsurance Agreement as described in Section 3.1 hereof.

      "BUSINESS" means collectively the insurance business conducted through the
NSA Insurance Subsidiaries and the Assumed Agency Business.

      "BUSINESS DAY" means any day excluding Saturday, Sunday and any day on
which banks in Cincinnati, Ohio have the option by law or other governmental
action to close.

      "CLOSING" has the meaning specified in Section 3.2.

      "CLOSING DATE" has the meaning specified in Section 3.2.

      "COMMISSION" means the Securities and Exchange Commission.

      "COMMON SHARES" has the meaning specified in the Recitals.

      "COMPANY" has the meaning specified in the preamble of this Agreement.

      "CONTINUING EMPLOYEES" means active employees of AFG who, as of the
Closing Date, will render or have rendered their services to the NSA Insurance
Subsidiaries or the Assumed Agency Business. For purposes of this Agreement,
active employees shall include employees who are on approved absences from work
(e.g., disability leave, statutory leave, approved leave of absence, etc.) as of
the Closing Date .

      "CORPORATE OBLIGATIONS" mean all liabilities related to the Business other
than (a) Extracontractual Obligations, (b) claims payments, including loss
adjustment expenses, and (c) other obligations for which a reserve has been
established. The date on which a Corporate Obligation is incurred by the Company
shall be deemed, in all circumstances, to be the date of the action taken or not
taken giving rise to the Obligation.
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                                      -3-

      "EXTRACONTRACTUAL OBLIGATIONS" means those liabilities not covered under
any other provision of this Agreement and which arise from or in connection with
the operation, administration, underwriting or claim handling of the Business,
such liabilities arising because of, but not limited to, the following: failure
to settle within the policy limit, or by reason of alleged or actual negligence,
fraud or bad faith in rejecting an offer of settlement, or denying coverage, or
in the preparation or prosecution of an appeal consequent upon such action.

      The date on which an Extracontractual Obligation is incurred shall be
deemed, in all circumstances, to be the date of the action taken or not taken
giving rise to the Extracontractual Obligation.

      "EXTRACONTRACTUAL OBLIGATIONS" shall also include losses in excess of
policy limits of an original policy, such loss in excess of limit having been
incurred because of failure to settle within the policy limit or by reason of
alleged or actual negligence, fraud or bad faith in rejecting coverage or an
offer of settlement or in the preparation of the defense or in the trial of any
action against an insured or reinsured or in the preparation of prosecution of
an appeal consequent upon such action. For purposes of this definition, the word
"loss" shall mean any amounts for which a party would have been contractually
liable to pay had it not been for the limit of the original policy.

      "FIRM PUBLIC OFFERING SHARES" means the Company's Common Shares issued in
the Public Offering, other than Common Shares issued as a result of exercise of
the Over-Allotment by the underwriters of the Public Offering.

      "GAI SUBSIDIARIES" mean Great American Contemporary Insurance Company and
Great Texas County Mutual Insurance Company.

      "FOREIGN SUBSIDIARIES" mean El Aguila Compania de Seguros, S.A. de C.V.,
Penn Central U.K. Limited, and their respective wholly-owned subsidiaries.

      "LOSSES" means any and all losses, liabilities, claims, damages,
obligations, payment, costs and expenses, matured or unmatured, absolute or
contingent, disclosed or undisclosed, determined or determinable, accrued or
unaccrued, liquidated or unliquidated, known or unknown (including, without
limitation, the costs and expenses of any Action, threatened Action, demand,
assessment, judgment, settlement and compromise relating thereto and attorneys'
fees and any and all expenses whatsoever reasonably incurred in investigating,
preparing or defending against, or settling any such Action or threatened Action
but reduced by, in all cases, the amount of reinsurance, whether or not
collectible).

      "NSA INSURANCE SUBSIDIARIES" means Atlanta Casualty Company, Leader
Insurance Company, Infinity Insurance Company, Windsor Insurance Company and
each of their respective U.S. domestic subsidiaries except, however, Leader
National Agency of Texas, Inc. ("Leader National").
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                                      -4-

      "OVER-ALLOTMENT" means an over-allotment option that may be exercised by
the underwriters of the Public Offering pursuant to the Underwriting Agreement
relating to the Public Offering.

      "PERSON" includes an individual, a partnership, a joint venture, a limited
liability company, a corporation, a trust, an unincorporated organization, a
group and a government or other department or agency thereof.

      "POST-CLOSING SUBSIDIARIES," with respect to either APU or the Company,
means collectively all of the Subsidiaries of such entity following the Closing
Date.

      "REGISTRATION STATEMENTS" means the registration statements on Form S-1,
as amended and supplemented from time to time, to be filed with the Commission
under the Securities Act, relating to the Public Offering.

      "SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.

      "SUBSIDIARY" means, as to any Person, (i) any corporation, partnership or
other entity of which at the time of determination more than 50% of the
outstanding Voting Stock is owned directly or indirectly, by such Person and/or
one or more Subsidiaries of such Person.

      "UNDERWRITING AGREEMENT" means the underwriting agreement among APU, the
Company and CS First Boston and the other underwriters named therein relating to
the Public Offering.

      "VOTING STOCK" means stock of any class or classes or other ownership
interest having general voting power under ordinary circumstances to elect a
majority of the board of directors, managers, trustees or persons with similar
functions of the entity in question, provided that, for the purposes of this
definition, stock which carries only the right to vote conditionally on the
happening of an event will not considered Voting Stock whether or not that event
has happened.

      Section 1.2. Other Definitional Provisions. The words "hereof," "hereto,"
"herein" and "hereunder" and words of similar import when used in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement; and references to any Article, Section, Exhibit or Schedule are
references to Articles, Sections, Exhibits or Schedules in or to this Agreement
unless otherwise specified.
<PAGE>
                                      -5-


                                   ARTICLE II
                       TRANSFER OF INSURANCE SUBSIDIARIES

      Section 2.1. Transfer of NSA Subsidiaries. On or prior to the Closing
Date, subject to the receipt of any required third party approvals, consents and
the satisfaction of any conditions precedent set forth herein, and in exchange
for 900 shares of the Company's common stock and the APU Note, APU shall, and
(as necessary) shall cause its Subsidiaries, to transfer and deliver to the
Company, all of the outstanding shares of capital stock of the NSA Subsidiaries
(the "NSA Shares"), free of any lien, claim or encumbrance of any kind (except
as required by the insurance regulations of certain states) and shall deliver to
the Company at the Closing certificates representing the NSA Shares, registered
and in such denominations as the Company shall notify APU prior to the Closing.

      Section 2.2. Transfer of Foreign Subsidiaries and Leader National. Prior
to the Closing Date, APU and the Company shall take all necessary steps to cause
a transfer to APU of all of the outstanding shares of capital stock, limited
partnership interests or other indicia of ownership, of the Foreign Subsidiaries
and Leader National. Such steps shall include the pursuit of a novation whereby
Windsor Insurance Company ("Windsor") shall be released, and Great American
Insurance Company shall assume, all obligations of Windsor under a reinsurance
agreement relating to Insurance (GB) Limited. If the approvals or authorizations
for the transfer of the Foreign Subsidiaries and Leader National have not been
obtained on or prior to the Closing Date, then APU and the Company shall
reasonably cooperate subsequent to the Closing Date in attempting to obtain such
approvals or authorizations as promptly thereafter as practicable.

      Section 2.3. Transfer of GAI Subsidiaries. As soon as reasonably
practicable after the Closing Date (a) all of the outstanding shares of capital
stock of Great American Contemporary Insurance Company and (b) that certain
management agreement in the case of Great Texas County Mutual Insurance Company
(collectively the "GAI Ownership Interests") shall be transferred or assigned,
as the case may be, to the Company at a price equal to the statutory book value
at the time of the transfer of each of the GAI Ownership Interests.
Notwithstanding the foregoing, the transfer of the GAI Ownership Interests shall
not bestow upon the Company any rights to, or license to use, any marks,
designs, logos, names, words or letters that include the words "Great American"
or those that are suggestive or derivative thereof, and Company shall take all
actions reasonably necessary to change the corporate names of the GAI
Subsidiaries to other names that will not reasonably suggest or imply any
affiliation with Great American Insurance Company.

                                  ARTICLE III
            INTERCOMPANY TRANSACTIONS AS OF THE CLOSING DATE; CLOSING

      Section 3.1. Ancillary Agreements. As a condition precedent to the
transfer of the capital stock of the NSA Subsidiaries under Section 2.1, the
parties, or, in certain cases, their
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                                      -6-

Affiliates, shall enter into such transfer documents as are customary to effect
the transfers set forth in Section 6.1 and shall enter into the following
Ancillary Agreements, in each case (unless otherwise specified in this Article
III or within the form of Ancillary Agreement) effective as of the Closing Date:

         3.1.1.   a Reinsurance Agreement substantially in the form of Exhibit
                  3.1.1;

         3.1.2.   a Registration Rights Agreement substantially in the form of
                  Exhibit 3.1.2;

         3.1.3.   an Investment Advisory Agreement substantially in the form of
                  Exhibit 3.1.3;

         3.1.4.   a Services Agreement substantially in the form of Exhibit
                  3.1.4;

         3.1.5.   a Noncompetition Agreement in the form of Exhibit 3.1.5;

         3.1.6.   a Tax Allocation Indemnification Agreement in the form of
                  Exhibit 3.1.6.

         3.1.7.   a License Agreement in the form of Exhibit 3.1.7.

         3.1.8.   a Sublease Agreement in the form of Exhibit 3.1.8.

      Section 3.2. Closing. Subject to the terms and conditions of this
Agreement, all transactions contemplated by this Agreement shall be consummated
at a closing (the "Closing") to be held at the offices of Keating, Muething &
Klekamp, P.L.L, Cincinnati, Ohio time, on the date of the delivery of the Firm
Public Offering Shares or at such other place or at such other time or on such
other date as APU and the Company may mutually agree upon in writing (the day on
which the Closing takes place being the "Closing Date").

                                   ARTICLE IV
                      REPESENTATIONS AND WARRANTIES OF APU

      Section 4.1. Organization, Authority and Qualification. APU and the NSA
Insurance Subsidiaries are duly organized, validly existing and in good standing
under the laws of each of their respective jurisdictions of incorporation, and
in good standing in all jurisdictions in which the failure to qualify or be in
good standing could materially adversely affect the consummation or the validity
of the transaction as provided for in this Agreement or any of the Ancillary
Agreements.

      APU has full corporate power and authority and has taken all corporate
action necessary to execute delivery of this Agreement and will have taken all
corporate action necessary to execute and deliver the Ancillary Agreements to
which it is a party and to perform its obligations hereunder and thereunder.
This Agreement has been, and each of the Ancillary Agreements to which APU is a
party will be, duly authorized, executed and delivered by APU; and, assuming
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                                      -7-

due authorization, execution and delivery by all other parties to such
agreement, each of this Agreement and such Ancillary Agreements constitutes or
will constitute, as the case may be, the valid and legally binding obligation of
APU, enforceable against APU and in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or effecting creditors' rights
and to general equity principles.

      Section 4.2. Transferred NSA Shares. APU, directly or indirectly, has, and
at the closing, the Company or its designees will receive good and marketable
title to all of the NSA Shares, in each case free and clear of any claim, lien
or encumbrance of any kind (except as required by the insurance regulations of
certain states).

                                    ARTICLE V
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

      Section 5.1. Organization, Authority and Qualification. The Company is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of incorporation, and in good standing in all jurisdictions in
which the failure to qualify or be in good standing can materially adversely
affect the consummation or validity of the transaction provided for in this
transaction.

      The Company has full corporate power and authority and has taken all
corporate action necessary to execute and deliver this Agreement and will have
taken all corporate action necessary to execute and deliver the Ancillary
Agreements to which it is a party and to perform its obligations hereunder and
thereunder. This Agreement has been, in each of the Ancillary Agreements to
which the Company is a party will be, duly authorized, executed and delivered by
the Company; and, assuming due authorization, execution and delivery by all
other parties to such Agreement, each of this Agreement and such Ancillary
Agreements constitutes or will constitute, as the case may be, the valid and
legally binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.

                                   ARTICLE VI
                                OTHER AGREEMENTS

      Section 6.1. Transfer of Assumed Agency Business. Upon the effective date
of the Reinsurance Agreement identified in Section 3.1.1 (the "Effective Date"),
AFG shall cause to be transferred to one or more of the NSA Insurance
Subsidiaries assets and liabilities related to the Assumed Agency Business, as
reflected in the statement of assets (excluding investments) and liabilities to
be transferred and reported on by the Company's independent auditors in the
registration statement for the Public Offering (the "Audited Statement"), along
with policy
<PAGE>
                                      -8-

renewal rights and other items of personal property and any related liabilities
as listed on Schedule 6.1.

      As part of the transfer of the Assumed Agency Business, on the Effective
Date AFG shall transfer to the Company cash and investment securities with an
agreed value equal to: (x) the liabilities to be transferred (expressed as a
positive number); less (y) the assets to be transferred; less (z) $5 million.
The liabilities to be transferred and the assets to be transferred shall be as
reflected in the Audited Statement. The investment securities to be transferred
including the amount of cash (the "Transferred Investment Securities") shall be
as set forth on Schedule 6.1 attached hereto and incorporated herein by
reference.

      As promptly as practicable after the Effective Date, but not later than 45
days after the Effective Date, AFG or its Affiliates will prepare and deliver to
Ernst & Young LLP a statement of the Assumed Agency Business assets (excluding
investments) and liabilities to be transferred ("Final Closing Statement") as of
the Effective Date, prepared on a basis consistent with the Audited Statement.
As promptly as practicable after receipt of the Final Closing Statement, but not
later than 30 days after such receipt, Ernst & Young LLP will prepare and
deliver to the parties hereto a report of Ernst & Young LLP on the Final Closing
Statement, which report shall state that the Final Closing Statement presents
fairly in all material respects, the assets (excluding investments) and
liabilities of the Assumed Agency Business at the Effective Date in accordance
with GAAP.

      If the value on the Effective Date of the Transferred Investment
Securities is less than (x) the liabilities to be transferred (expressed as a
positive number) less (y) the assets to be transferred, less (z) $5 million,
(all as reflected in the Final Closing Statement), AFG shall transfer investment
securities or cash to the Company in an amount equal to the difference. If the
value on the Effective Date of the Transferred Investment Securities is greater
than (x) the liabilities to be transferred (expressed as a positive number),
less (y) the assets to be transferred, less (z) $5 million (all as reflected in
the Final Closing Statement) then the Company shall transfer cash or investment
securities to AFG in an amount equal to the excess.

      Any amount due pursuant to Section 6.1 shall include interest thereon from
the Effective Date through the payment date calculated at the London Interbank
Offered Rate quoted for six month periods, as reported in The Wall Street
Journal on the Closing Date, plus 100 basis points.

      Section 6.2. Indemnification. APU shall indemnify, defend and hold
harmless the Company and its post-closing Subsidiaries (the "Company
Indemnitees") from and against any and all Losses of such Company Indemnitee
arising out of, by reason of or otherwise in connection with Extracontractual
Obligations or Corporate Obligations that (i) were incurred or that arose or
existed, or where the Actions, inactions or transactions giving rise to the
Extracontractual Obligations or Corporate Obligations arose or existed prior to
the Closing Date, and (ii) equal or exceed $200,000, in which case the entire
amount of Losses arising out of the Extracontractual Obligation or Corporate
Obligation, whichever is the case, shall be eligible for indemnification
("Eligible Losses").
<PAGE>
                                      -9-

      Notwithstanding anything to the contrary in this Agreement or the
Ancillary Agreements, the Company Indemnitees shall be entitled to
indemnification hereunder only to the extent that the aggregate amount of
Eligible Losses exceeds $12 million ("Indemnifiable Losses"), in which case
APU's aggregate liability to the Company Indemnitees shall be limited to 60% of
the first $25 million of Indemnifiable Losses. By way of examples, with respect
to two unrelated Corporate Obligations, each resulting in Losses to the Company
of $175,000, the Company would not be entitled to indemnification from APU in
any amount and neither claim would be considered in determining whether the
aggregate amount of Eligible Losses exceeds $12 million. With respect to a
Corporate Obligation resulting in $300,000 of Losses which, when added to the
aggregate amount of other Eligible Losses, equals $12.1 million, the Company
would be entitled to indemnification from APU in the amount of $60,000 (60% of
the amount of the Loss in excess of $12 million). With respect to five unrelated
Corporate Obligations, each resulting in Losses to the Company of $500,000
which, when added to the aggregate amount of other Eligible Losses, equals $3
million, the Company would not be entitled to indemnification from APU in any
amount because the aggregate amount of Eligible Losses does not exceed $12
million.

      The Company agrees that it shall establish reserves for Extracontractual
Obligations and Corporate Obligations in a manner consistent in all material
respects with past practices (to the extent permitted by applicable law and
applicable accounting rules and conventions pursuant to both generally accepted
accounting principles and statutory accounting principles) and shall consult
with APU on the Company's intentions to settle, pay, defend, arbitrate or
compromise any Indemnifiable Losses.

      Section 6.3. Employee Benefits. Until the Closing Date, all Continuing
Employees shall continue to participate in AFG's benefit plans, including
retirement programs, incentive compensation plans and medical and welfare
benefits (the "AFG Benefit Plans"). On the Closing Date, Continuing Employees'
participation in the AFG Plans shall terminate; provided, however, that all
options to purchase AFG common stock under AFG's Stock Option Plan held by
Continuing Employees shall vest as of the Closing Date and remain exercisable
for a period of three years thereafter.

      As soon as practicable after the Closing Date, the Company shall establish
welfare benefit plans with terms and conditions generally comparable in material
respects to welfare benefits offered by AFG. The Company shall use commercially
reasonable efforts to establish as soon as practicable after the Closing Date,
retirement and savings plans for the benefit of its employees.

      AFG's welfare benefit plans including, but not limited to, disability,
medical and severance plans, shall be responsible for welfare benefit claims
relating to the Continuing Employees whose services have been rendered in
connection with the Assumed Agency Business as follows:

      (1) for claims incurred prior to January 1, 2002 by Continuing Employees
involved in claims functions with the Assumed Agency Business; and
<PAGE>
                                      -10-

      (2) for claims incurred prior to October 10, 2002 by Continuing Employees
involved in non-claims functions with the Assumed Agency Business.

      The Company shall be responsible for all other claims under such welfare
benefit plans incurred after these dates; provided, however, that the parties
shall negotiate in good faith with respect to their respective responsibilities
for long term disability claims incurred after the aforementioned dates. For
this purpose, a claim is incurred when the medical or other service giving rise
to the claim is performed, except that in the case of death or disability, a
claim is incurred on the date of death or date of disability as the case may be.

      Nothing contained in this Section 6.3 shall be construed as a requirement
to continue to employ any Continuing Employee after the Closing, or to limit the
ability of the Company following the Closing Date to amend, modify or terminate
any plan adopted by the Company, consistent with the terms of such plan, as
determined in the Company's sole discretion. No Continuing Employee is a third
party beneficiary of this Section 6.3.

      Section 6.4 Insurance Management Services. The parties hereto agree that
should Great American Insurance Company retain the direct to consumer personal
auto book of business ("Direct Business") after the Closing Date, the Company
and Great American Insurance Company shall negotiate in good faith an agreement
under which the Company will provide, at commercially reasonable rates, certain
management services with respect to the Direct Business.

      Section 6.5 Repayment of APU Note. Upon completion of the Senior Note
Offering, the Company shall repay, in full, including accrued interest thereon,
the APU Note.

                                   ARTICLE VII
                                  MISCELLANEOUS

      Section 7.1. Survival. All representations, covenants and agreements
contained or provided for herein shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the party
benefiting from any such covenant or agreement, and shall survive the execution
of this Agreement.

      Section 7.2. Further Assurances. If at any time after the Closing Date any
further action is reasonably necessary or advisable to carry out the purposes of
this Agreement or any Ancillary Agreements, the proper officers of each party to
this Agreement shall take all such action or cause the applicable Post-Closing
Subsidiaries to take all such action. Each of APU and its Post-closing
Subsidiaries and the Company and its Post-closing Subsidiaries shall use its
commercially reasonable efforts to obtain all consents and approvals, to enter
into all amendatory agreements and to make all filings and applications that may
be required for the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements, including, without limitation, all
applicable governmental and regulatory filings.


<PAGE>
                                      -11-

      Section 7.3. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Ohio, without regard to
its conflict of laws principles.

      Section 7.4. Notices. All notices, requests, claims, demands and other
communications hereunder and under the Ancillary Agreements shall be in writing
and shall be deemed to have been duly given if delivered by hand (with receipt
confirmed), or by certified mail, postage prepaid and return receipt requested,
or facsimile transmission addressed as follows (or to such other address as a
party may designate by written notice to the others) and shall be deemed given
on the date on which such notice is received:

      If to APU:

      American Premier Underwriters, Inc.
      900 Provident Tower
      Cincinnati, Ohio 45202
      Attention:  James C. Kennedy, Esq.
      Facsimile:  (513) 579-0108

      with a copy to:

      Keating, Muething & Klekamp P.L.L.
      1400 Provident Tower
      One East Fourth Street
      Cincinnati, Ohio 45202
      Attention: Edward E. Steiner, Esq.
      Facsimile:  (513) 579-6578

      If to the Company:

      Infinity Property and Casualty Corporation

      2204 Lakeshore Drive
      Birmingham, Alabama  35209
      Attention:  Samuel J. Simon, General Counsel
      Facsimile:  (205) 803-8487

      Section 7.5. Amendment and Modification. The parties may by written
agreement, subject to any regulatory approval as may be required, (a) extend the
time for the performance of any of the obligations or other acts of the parties
hereto; (b) waive any inaccuracies in the documents delivered pursuant to this
Agreement, and (c) waive compliance with or modify, amend or supplement any of
the agreements contained in this Agreement or waive or modify performance of any
of the obligations of any of the parties hereto. This Agreement may not be
amended or modified except by an instrument in writing duly signed on behalf of
the parties hereto.
<PAGE>
                                      -12-


      Section 7.6. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.

      Section 7.7. No Third Party Beneficiaries. This Agreement is solely for
the benefit of the parties hereto and shall not be deemed to confer upon any
third party any remedy, claim, reimbursement, claim of action or other right in
excess of those existing without reference to this Agreement.

      Section 7.8. Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.

      Section 7.9. Severability. To the extent any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remaining provisions of this Agreement shall be unaffected and shall
continue in full force and effect.

      Section 7.10. Waiver. No failure by any party to take any action or assert
any right hereunder shall be deemed to be a waiver of such right in the event of
the continuation or repetition of the circumstances giving rise to such right,
unless expressly waived in writing.

      Section 7.11. Assignment of this Agreement. Neither party may assign this
Agreement by operation of law or otherwise without the express written consent
of the other party; provided, however, this Agreement may be assigned by
operation of law or otherwise without the express written consent of the APU and
the Company to their respective Post-closing Subsidiaries it being understood
and agreed that such assignment does not relieve the assigning party of
liability hereunder.

      Section 7.12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
<PAGE>
                                      -13-

      IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.

                                   AMERICAN PREMIER UNDERWRITERS, INC.

                                   By:
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------


                                   INFINITY PROPERTY AND CASUALTY
                                   CORPORATION

                                   By:
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------


      American Financial Group, Inc. shall perform and/or guarantees the
performance of the obligations set forth in Sections II and VI of this
Agreement.


                                   AMERICAN FINANCIAL GROUP, INC.

                                   By:
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
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