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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


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


For the Quarterly Period Ended                          Commission File
June 30, 2001                                           No. 1-7361



                         AMERICAN FINANCIAL CORPORATION




Incorporated under                                      IRS Employer I.D.
the Laws of Ohio                                        No. 31-0624874


                 One East Fourth Street, Cincinnati, Ohio 45202
                                 (513) 579-2121






      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 August 1, 2001, there were 10,593,000 shares of the Registrant's
Common Stock outstanding, all of which were owned by American Financial Group,
Inc.

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                                  Page 1 of 21
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<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q
                                     PART I
                              FINANCIAL INFORMATION

                 AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                             (Dollars In Thousands)

                                                          June 30,  December 31,
                                                             2001          2000
                                                       ----------   -----------
Assets:
   Cash and short-term investments                    $   283,783   $   437,263
   Investments:
     Fixed maturities - at market
       (amortized cost - $10,424,166 and $10,148,248)  10,513,266    10,164,648
     Other stocks - at market
       (cost - $195,896 and $174,959)                     365,696       385,359
     Investment in investee corporations                     -           23,996
     Policy loans                                         210,721       213,469
     Real estate and other investments                    245,548       270,250
                                                      -----------   -----------
         Total investments                             11,335,231    11,057,722

   Recoverables from reinsurers and prepaid
     reinsurance premiums                               1,971,791     1,845,171
   Agents' balances and premiums receivable               743,162       700,215
   Deferred acquisition costs                             801,543       763,097
   Other receivables                                      267,367       239,806
   Variable annuity assets (separate accounts)            530,710       533,655
   Prepaid expenses, deferred charges and other asset     484,019       508,163
   Cost in excess of net assets acquired                  324,414       322,380
                                                      -----------   -----------

                                                      $16,742,020   $16,407,472
                                                      ===========   ===========
<PAGE>
Liabilities and Capital:
   Unpaid losses and loss adjustment expenses         $ 4,576,306   $ 4,515,561
   Unearned premiums                                    1,501,957     1,414,492
   Annuity benefits accumulated                         5,603,648     5,543,683
   Life, accident and health reserves                     601,951       599,360
   Payable to American Financial Group, Inc.              395,007       439,371
   Long-term debt:
     Holding companies                                    222,871       204,338
     Subsidiaries                                         172,655       195,087
   Variable annuity liabilities (separate accounts)       530,710       533,655
   Accounts payable, accrued expenses and other
     liabilities                                        1,116,394       998,104
                                                      -----------   -----------
         Total liabilities                             14,721,499    14,443,651

   Minority interest                                      517,866       509,705

   Shareholders' Equity:
   Preferred Stock - at liquidation value                  72,154        72,154
     Common Stock, no par value
       - 20,000,000 shares authorized
       - 10,593,000 shares outstanding                      9,625         9,625
     Capital surplus                                      980,891       974,766
     Retained earnings                                    285,085       258,371
     Unrealized gain on marketable securities, net        154,900       139,200
                                                      -----------   -----------
         Total shareholders' equity                     1,502,655     1,454,116
                                                      -----------   -----------

                                                      $16,742,020   $16,407,472
                                                      ===========   ===========


                                        2


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

                 AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENT OF EARNINGS
                                 (In Thousands)
<TABLE>
<CAPTION>
                                             Three months ended            Six months ended
                                                   June 30,                     June 30,
                                            ---------------------      ------------------------
                                                 2001        2000            2001          2000
                                                 ----        ----            ----          ----
<S>                                          <C>         <C>           <C>           <C>
Income:
    Property and casualty insurance
      premiums                               $679,563    $623,721      $1,324,286    $1,195,858
    Life, accident and health premiums         70,533      49,704         139,691        99,623
    Investment income                         217,451     209,952         427,241       418,967
    Realized gains (losses) on:
      Securities                              (26,425)     (3,907)        (33,306)       (5,340)
      Subsidiaries                               -         25,000          (1,586)       25,000
    Other income                               53,838      55,188         112,130       109,815
                                             --------    --------      ----------    ----------
                                              994,960     959,658       1,968,456     1,843,923

Costs and Expenses:
    Property and casualty insurance:
      Losses and loss adjustment expenses     526,411     483,497       1,022,627       901,148
      Commissions and other underwriting
        expenses                              192,902     182,573         377,876       361,005
    Annuity benefits                           70,716      79,727         139,980       145,888
    Life, accident and health benefits         52,211      36,885         106,294        73,609
    Interest charges on borrowed money         14,777      16,544          33,650        32,098
    Other operating and general expenses      114,505     129,756         222,376       225,862
                                             --------    --------      ----------    ----------
                                              971,522     928,982       1,902,803     1,739,610
                                             --------    --------      ----------    ----------

Operating earnings before income taxes         23,438      30,676          65,653       104,313
Provision for income taxes                      4,347       8,363          19,299        32,618
                                             --------    --------      ----------    ----------

Net operating earnings                         19,091      22,313          46,354        71,695
Minority interest expense, net of tax          (4,188)     (3,140)        (11,107)      (11,347)
Equity in net earnings (losses) of
    investees, net of tax                      (2,313)      2,027          (5,647)        9,202
                                             --------    --------      ----------    ----------

Net Earnings                                 $ 12,590    $ 21,200      $   29,600    $   69,550
                                             ========    ========      ==========    ==========
</TABLE>


                                        3


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

                 AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                             (Dollars in Thousands)
<TABLE>


                                                 Common Stock                      Unrealized
                                   Preferred      and Capital     Retained        Gain (Loss)
                                       Stock          Surplus     Earnings      on Securities             Total
                                   ---------     ------------     --------      -------------        ----------
<S>                                 <C>             <C>          <C>                <C>             <C>
Balance at January 1, 2001           $72,154         $984,391     $258,371           $139,200        $1,454,116

  Net earnings                          -                -          29,600               -               29,600
  Change in unrealized                  -                -            -                15,700            15,700
                                                                                                      ---------
    Comprehensive income                                                                                 45,300

  Capital contribution from parent      -               6,134         -                  -                6,134
  Dividends on Preferred Stock          -                -          (2,886)              -               (2,886)
  Other                                  -                 (9)        -                  -                   (9)
                                     -------         --------     --------           --------        ----------

Balance at June 30, 2001             $72,154         $990,516     $285,085           $154,900        $1,502,655
                                     =======         ========     ========           ========        ==========






Balance at January 1, 2000           $72,154         $970,407     $296,246          ($ 14,700)       $1,324,107

  Net earnings                          -                -          69,550               -               69,550
  Change in unrealized                  -                -            -               (92,100)          (92,100)
                                                                                                     ----------
    Comprehensive income (loss)                                                                         (22,550)

  Capital contribution from parent      -               6,134         -                  -                6,134
  Dividends on Preferred Stock          -                -          (2,886)              -               (2,886)
  Other                                 -                 (98)          22               -                  (76)
                                     -------         --------     --------           --------        ----------

Balance at June 30, 2000             $72,154         $976,443     $362,932          ($106,800)       $1,304,729
                                     =======         ========     ========           ========        ==========

</TABLE>





                                        4


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

                 AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (In Thousands)

                                                            Six months ended
                                                                  June 30,
                                                           -------------------
                                                                2001      2000
                                                                ----      ----
Operating Activities:
    Net earnings                                             $29,600  $ 69,550
    Adjustments:
      Equity in net (earnings) losses of investees             5,647    (9,202)
      Depreciation and amortization                           71,503    63,863
      Annuity benefits                                       139,980   145,888
      Realized (gains) losses on investing activities         10,167   (33,330)
      Deferred annuity and life policy acquisition costs     (73,530)  (70,617)
      Increase in reinsurance and other receivables          (77,612)  (34,563)
      Increase in other assets                               (26,742)  (56,417)
      Increase in insurance claims and reserves              169,679   170,303
      Increase (decrease) in other liabilities                74,352   (19,302)
      Increase (decrease) in minority interest                 4,770      (347)
      Other, net                                               1,521    (4,944)
                                                            --------  --------
                                                             329,335   220,882
                                                            --------  --------
Investing Activities:
    Purchases of and additional investments in:
      Fixed maturity investments                            (981,049) (942,929)
      Equity securities                                       (2,907)  (20,126)
      Real estate, property and equipment                    (31,090)  (39,819)
    Maturities and redemptions of fixed maturity
      investments                                            337,280   348,447
    Sales of:
      Fixed maturity investments                             368,003   380,062
      Equity securities                                        9,148    30,678
      Subsidiaries                                            22,000      -
      Real estate, property and equipment                     43,456     4,810
    Cash and short-term investments of acquired
      (former) subsidiaries                                 (132,858)      259
    Decrease (increase) in other investments                    (171)    2,337
                                                            --------  --------
                                                            (368,188) (236,281)
                                                            --------  --------
<PAGE>
Financing Activities:
    Fixed annuity receipts                                   271,827   251,100
    Annuity surrenders, benefits and withdrawals            (341,310) (387,667)
    Net transfers to variable annuity assets                  (1,368)  (34,150)
    Additional long-term borrowings                           78,868   110,172
    Reductions of long-term debt                             (83,192)  (26,981)
    Borrowings from AFG                                        7,600     4,500
    Payments to AFG                                          (53,500)  (52,313)
    Capital contribution                                       9,334     9,334
    Repurchases of trust preferred securities                   -       (1,427)
    Cash dividends paid                                       (2,886)   (2,886)
                                                            --------  --------
                                                            (114,627) (130,318)
                                                            --------  --------

Net Decrease in Cash and Short-term Investments             (153,480) (145,717)

Cash and short-term investments at beginning
    of period                                                437,263   389,018
                                                            --------  --------

Cash and short-term investments at end of period            $283,783  $243,301
                                                            ========  ========




                                        5


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


A.    ACCOUNTING POLICIES

      BASIS OF PRESENTATION The accompanying consolidated financial statements
      for American Financial Corporation ("AFC") and 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 years to conform to the
      current year's presentation. All significant intercompany balances and
      transactions have been eliminated. All acquisitions have been treated as
      purchases. The results of operations of companies since their formation or
      acquisition are included in the consolidated financial statements.

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

      INVESTMENTS All fixed maturity securities are considered "available for
      sale" and reported at fair value with unrealized gains and losses reported
      as a separate component of shareholders' equity. Short-term investments
      are carried at cost; loans receivable are carried primarily at the
      aggregate unpaid balance. Premiums and discounts on mortgage-backed
      securities are amortized over a period based on estimated future principal
      prepayments and adjusted to reflect actual prepayments.

      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 INVESTEE CORPORATIONS Investments in securities of 20%- to
      50%-owned companies are generally carried at cost, adjusted for AFC's
      proportionate share of their undistributed earnings or losses.

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

      COST IN EXCESS OF NET ASSETS ACQUIRED The excess of cost of subsidiaries
      over AFC's equity in the underlying net assets ("goodwill") is being
      amortized over periods of 20 to 40 years.
<PAGE>
      INSURANCE As discussed under "Reinsurance" below, unpaid losses and loss
      adjustment expenses and unearned premiums have not been reduced for
      reinsurance recoverable. To the extent that unrealized gains (losses) from
      securities classified as "available for sale" would result in adjustments
      to deferred acquisition costs and policyholder liabilities had those gains
      (losses) actually been realized, such balance sheet amounts are adjusted,
      net of deferred taxes.



                                        6


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


            REINSURANCE In the normal course of business, AFC's insurance
      subsidiaries cede reinsurance to other companies to diversify risk and
      limit maximum loss arising from large claims. To the extent that any
      reinsuring companies are unable to meet obligations under agreements
      covering reinsurance ceded, AFC's insurance subsidiaries would remain
      liable. Amounts recoverable from reinsurers are estimated in a manner
      consistent with the claim liability associated with the reinsured
      policies. AFC's insurance subsidiaries report as assets (a) the estimated
      reinsurance recoverable on unpaid losses, including an estimate for losses
      incurred but not reported, and (b) amounts paid to reinsurers applicable
      to the unexpired terms of policies in force. AFC's insurance subsidiaries
      also assume reinsurance from other companies. Income on reinsurance
      assumed is recognized based on reports received from ceding companies.

            DEFERRED ACQUISITION COSTS Policy acquisition costs (principally
      commissions, premium taxes and other marketing and underwriting expenses)
      related to the production of new business are deferred ("DPAC"). For the
      property and casualty companies, DPAC is limited based upon recoverability
      without any consideration for anticipated investment income and is charged
      against income ratably over the terms of the related policies. 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. 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.

            UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES The net liabilities
      stated for unpaid claims and for expenses of investigation and adjustment
      of unpaid claims are based upon (a) the accumulation of case estimates for
      losses reported prior to the close of the accounting period on direct
      business written; (b) estimates received from ceding reinsurers and
      insurance pools and associations; (c) estimates of unreported losses based
      on past experience; (d) estimates based on experience of expenses for
      investigating and adjusting claims and (e) the current state of the law
      and coverage litigation. These liabilities are subject to the impact of
      changes in claim amounts and frequency and other factors. Changes in
      estimates of the liabilities for losses and loss adjustment expenses are
      reflected in the Statement of Earnings in the period in which determined.

      In response to a recent increase in asbestos and other environmental
      ("A&E") claims, AFC has begun a current review of such exposures. Any
      strengthening of reserves determined to be necessary will be recorded upon
      completion of the review. With the exception of the A&E claims, management
      believes that the liabilities for unpaid losses and loss adjustment
      expenses are adequate.
<PAGE>
            ANNUITY BENEFITS ACCUMULATED Annuity receipts and benefit payments
      are 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 RESERVES Liabilities for future policy
      benefits under traditional life, accident and health policies are computed
      using the net level premium method. Computations are based on anticipated
      investment yield, mortality, morbidity and surrenders and include
      provisions for unfavorable deviations. Reserves established for accident
      and health claims are modified as necessary to reflect actual experience
      and developing trends.



                                        7


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


            VARIABLE ANNUITY ASSETS AND LIABILITIES Separate accounts related to
      variable annuities represent deposits invested in underlying investment
      funds on which Great American Financial Resources, Inc. ("GAFRI"), an
      83%-owned subsidiary, earns a fee. Investment funds are selected and may
      be changed only by the policyholder.

            PREMIUM RECOGNITION Property and casualty premiums are earned over
      the terms of the policies on a pro rata basis. Unearned premiums represent
      that portion of premiums written which is applicable to the unexpired
      terms of policies in force. On reinsurance assumed from other insurance
      companies or written through various underwriting organizations, unearned
      premiums are based on reports received from such companies and
      organizations. For traditional life, accident and health products,
      premiums are recognized as revenue when legally collectible from
      policyholders. 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.

            POLICYHOLDER DIVIDENDS Dividends payable to policyholders are
      included in "Accounts payable, accrued expenses and other liabilities" and
      represent estimates of amounts payable on participating policies which
      share in favorable underwriting results. Estimates are accrued during the
      period in which premiums are earned. Changes in estimates are included in
      income in the period determined. Policyholder dividends do not become
      legal liabilities unless and until declared by the boards of directors of
      the insurance companies.

      MINORITY INTEREST For balance sheet purposes, minority interest represents
      (i) the interests of noncontrolling shareholders in AFC subsidiaries,
      including preferred securities issued by trust subsidiaries of GAFRI and
      (ii) American Financial Group, Inc.'s ("AFG") direct ownership interest in
      American Premier Underwriters, Inc. ("American Premier" or "APU") and
      American Financial Enterprises, Inc. For income statement purposes,
      minority interest expense represents those shareholders' interest in the
      earnings of AFC subsidiaries as well as accrued distributions on the trust
      preferred securities.

      INCOME TAXES AFC files consolidated federal income tax returns which
      include all 80%-owned U.S. subsidiaries, except for certain life insurance
      subsidiaries and their subsidiaries. Deferred income taxes are calculated
      using the liability method. Under this method, deferred income tax assets
      and liabilities are determined based on differences between financial
      reporting and tax bases and are measured using enacted tax rates. Deferred
      tax assets are recognized if it is more likely than not that a benefit
      will be realized.
<PAGE>
      BENEFIT PLANS AFC provides retirement benefits to qualified employees of
      participating companies through contributory and noncontributory defined
      contribution plans contained in AFG's Retirement and Savings Plan. Under
      the retirement portion of the plan, company contributions are invested
      primarily in securities of AFG and affiliates. Under the savings portion
      of the plan, AFC matches a specific portion of employee contributions.
      Contributions to benefit plans are charged against earnings in the year
      for which they are declared.

      AFC and many of its subsidiaries provide health care and life insurance
      benefits to eligible retirees. AFC also provides postemployment benefits
      to former or inactive employees (primarily those on disability) who were
      not deemed retired under other company plans. The projected future cost of
      providing these benefits is expensed over the period employees earn such
      benefits.


                                        8


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


      DERIVATIVES Effective October 1, 2000, AFC implemented Statement of
      Financial Accounting Standards ("SFAS") No. 133, "Accounting for
      Derivative Instruments and Hedging Activities", which establishes
      accounting and reporting standards for derivative instruments (including
      derivative instruments that are embedded in other contracts) and for
      hedging activities. Prior year financial statements were not restated.
      SFAS No. 133 generally requires that derivatives (both assets and
      liabilities) be recognized in the balance sheet at fair value with changes
      in fair value included in current earnings.

      Derivatives included in AFC'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 investments)
      used to mitigate the risk embedded in the equity-indexed annuity products.

      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 obtaining resources from owners and providing them with a return
      on their investments, borrowing money and repaying amounts borrowed.
      Annuity receipts, benefits and withdrawals are also reflected as financing
      activities. 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 the
      financial statements.

B.    SALE OF SUBSIDIARIES

      JAPANESE DIVISION In December 2000, AFC agreed to sell its Japanese
      property and casualty division to Mitsui Marine & Fire Insurance Company
      of America for $22 million in cash and recorded a $10.7 million pretax
      loss on the sale. Upon completion of the sale in March 2001, AFC realized
      an additional pretax loss of $1.6 million and deferred a gain of
      approximately $21 million on ceded insurance which is being recognized
      over the estimated settlement period (weighted average of 4 years) of the
      ceded claims. At the same time, a reinsurance agreement under which Great
      American Insurance ceded a portion of its pool of insurance to Mitsui was
      terminated. The Japanese division generated net written premiums of
      approximately $60 million per year to Great American while Great American
      ceded approximately $45 million per year to Mitsui.

      COMMERCIAL LINES DIVISION In 1998, AFC sold its Commercial lines division
      to Ohio Casualty Corporation. In August 2000, AFC received an additional
      payment of $25 million from Ohio Casualty based on retention and growth
      through May 2000 of the businesses sold. This earn-out was recognized as
      additional "gain on sale of subsidiary" in the second quarter of 2000.


                                       9

<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


C.    SEGMENTS OF OPERATIONS AFC's property and casualty group is engaged
      primarily in private passenger automobile and specialty insurance
      businesses. The Specialty group includes a highly diversified group of
      specialty business units. Some of the more significant areas are inland
      and ocean marine, California workers' compensation, agricultural-related
      coverages, executive and professional liability, fidelity and surety
      bonds, collateral protection, and umbrella and excess coverages. The
      Personal group writes nonstandard and preferred/standard private passenger
      auto and other personal insurance coverage. AFC's annuity, life and health
      business markets primarily retirement products as well as life and
      supplemental health insurance.
<PAGE>
      The following table (in thousands) shows AFC's revenues and operating
      profit (loss) by significant business segment. Operating profit (loss)
      represents total revenues less operating expenses.
<TABLE>
<CAPTION>
                                                Three months ended          Six months ended
                                                      June 30,                    June 30,
                                                -------------------     -----------------------
                                                     2001      2000          2001          2000
                                                     ----      ----          ----          ----
         <S>                                     <C>      <C>         <C>           <C>
         Revenues (a)
         Property and casualty insurance:
           Premiums earned:
             Specialty                           $356,188  $307,388    $  672,495    $  582,211
             Personal                             322,629   316,333       650,261       613,646
             Other lines - primarily
               discontinued                           746      -            1,530             1
                                                 --------  --------    ----------    ----------
                                                  679,563   623,721     1,324,286     1,195,858
           Investment and other income            106,440   129,311       213,775       250,478
                                                 --------  --------     ---------    ----------
                                                  786,003   753,032     1,538,061     1,446,336
         Annuities, life and health (b)           202,562   195,945       419,592       383,282
         Other                                      6,395    10,681        10,803        14,305
                                                 --------  --------    ----------    ----------
                                                 $994,960  $959,658    $1,968,456    $1,843,923
                                                 ========  ========    ==========    ==========

         Operating Profit (Loss)
         Property and casualty insurance:
           Underwriting:
             Specialty                          ($  4,609)($ 14,680)  ($    6,839)  ($   25,178)
             Personal                             (35,795)  (26,392)      (63,577)      (37,325)
             Other lines - primarily
               discontinued                           654    (1,277)       (5,801)       (3,792)
                                                 --------  --------    ----------    ----------
                                                  (39,750)  (42,349)      (76,217)      (66,295)
           Investment and other income             69,147    93,482       144,349       178,007
                                                 --------  --------    ----------    ----------
                                                   29,397    51,133        68,132       111,712
         Annuities, life and health                17,335    (2,209)       47,458        25,305
         Other (c)                                (23,294)  (18,248)      (49,937)      (32,704)
                                                 --------  --------    ----------    ----------
                                                 $ 23,438  $ 30,676    $   65,653    $  104,313
                                                 ========  ========    ==========    ==========
</TABLE>
         (a) Revenues include sales of products and services as well as other
             income earned by the respective segments.
         (b) Represents primarily investment income.
         (c) Includes holding company expenses.




                                       10


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


D.    INVESTEE CORPORATIONS Investment in investee corporations reflects AFC's
      ownership of 24 million shares (33%) of Chiquita common stock. The market
      value of this investment was $24 million at December 31, 2000. Chiquita is
      a leading international marketer, producer and distributor of quality
      fresh fruits and vegetables and processed foods. Summarized financial
      information for Chiquita for the six months ended June 30, 2000, follows
      (in millions):

         Net Sales                                   $1,260
         Operating Income                               112
         Income before Extraordinary Item                46
         Extraordinary Gain on Debt Prepayment            2
         Net Income                                      48
         Net Income Attributed to Common Shares          39

      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. Although the expected restructuring would not impact Chiquita's
      day-to-day operations, it would adversely affect the holders of its stock,
      including AFC.

      START-UP MANUFACTURING BUSINESSES Since 1998, AFC subsidiaries have made
      loans to two start-up manufacturing businesses which were previously owned
      by unrelated third-parties. During 2000, the former owners chose to
      forfeit their equity interests to AFC rather than invest additional
      capital. In the fourth quarter of 2000, AFC sold the equity interests to a
      group of employees for nominal cash consideration plus warrants to
      repurchase a significant ownership interest. Due to the absence of
      significant financial investment by the buyers relative to the amount of
      debt owed to AFC subsidiaries, the sale was not recognized as a
      divestiture for accounting purposes. Assets of the businesses transferred
      (approximately $55 million at June 30, 2001 and December 31, 2000) are
      included in other assets; liabilities of the businesses transferred
      (approximately $7 million at June 30, 2001 and December 31, 2000, after
      elimination of loans from AFC subsidiaries) are included in other
      liabilities. AFC's equity in the losses of these two companies ($2.3
      million in the second quarter and $5.6 million in the first six months of
      2001) is included in investee losses in the statement of earnings.

E.    PAYABLE TO AMERICAN FINANCIAL GROUP AFC has a reciprocal Master Credit
      Agreement with various AFG holding companies under which these companies
      make funds available to each other for general corporate purposes.
<PAGE>
F.    LONG-TERM DEBT  The carrying value of long-term debt consisted of
      the following (in thousands):
                                                          June 30,  December 31,
                                                             2001          2000
                                                         --------     ---------
          Holding Companies:
             AFC notes payable under bank line           $197,000      $178,000
             APU 10-7/8% Subordinated Notes due May 2011   11,584        11,611
             Other                                         14,287        14,727
                                                         --------      --------

                                                         $222,871      $204,338
                                                         ========      ========
          Subsidiaries:
             GAFRI 6-7/8% Senior Notes due June 2008     $100,000      $100,000
             GAFRI notes payable under bank line           41,300        48,500
             Notes payable secured by real estate          16,569        31,201
             Other                                         14,786        15,386
                                                         --------      --------

                                                         $172,655      $195,087
                                                         ========      ========
                                       11


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


      At June 30, 2001, sinking fund and other scheduled principal payments on
      debt for the balance of 2001 and the subsequent five years were as follows
      (in millions):
                      Holding
                    Companies     Subsidiaries       Total
                    ---------     ------------      ------
            2001      $   .9            $  .6       $  1.5
            2002       207.3              1.3        208.6
            2003         -                1.3          1.3
            2004         -               42.3         42.3
            2005         -               10.0         10.0
            2006         -                 .7           .7

      Debentures purchased in excess of scheduled payments may be applied to
      satisfy any sinking fund requirement. The scheduled principal payments
      shown above assume that debentures previously purchased are applied to the
      earliest scheduled retirements.

      AFC and GAFRI each have an unsecured credit agreement with a group of
      banks under which they can borrow up to $300 million and $155 million,
      respectively. Borrowings bear interest at floating rates based on prime or
      Eurodollar rates. Loans mature in December 2002 under the AFC credit
      agreement and in December 2004 under the GAFRI credit agreement.

G.    MINORITY INTEREST  Minority interest in AFC's balance sheet is comprised
      of the following (in thousands):
                                                         June 30,   December 31,
                                                            2001           2000
                                                        --------    -----------
          Interest of AFG (parent) and noncontrolling
            shareholders in subsidiaries' common stock  $299,953       $291,792
          Preferred securities issued by
            subsidiary trusts                            217,913        217,913
                                                        --------       --------

                                                        $517,866       $509,705
                                                        ========       ========
<PAGE>
      TRUST ISSUED PREFERRED SECURITIES Wholly-owned subsidiary trusts of GAFRI
      have issued preferred securities and, in turn, purchased a like amount of
      subordinated debt which provides interest and principal payments to fund
      the respective trusts' obligations. The preferred securities must be
      redeemed upon maturity or redemption of the subordinated debt. GAFRI
      effectively provides unconditional guarantees of its respective trusts'
      obligations.

      The preferred securities consisted of the following (in thousands):
<TABLE>
<CAPTION>
      Date of                                                June 30,     December 31,    Optional
      Issuance            Issue (Maturity Date)                 2001             2000     Redemption Dates
      -------------       ------------------------          --------      -----------     ----------------------------
<S>                       <C>                               <C>              <C>         <C>
      November 1996       GAFRI 9-1/4% TOPrS (2026)          $72,913          $72,913     On or after 11/7/2001
      March 1997          GAFRI 8-7/8% Pfd   (2027)           70,000           70,000     On or after 3/1/2007
      May 1997            GAFRI 7-1/4% ROPES (2041)           75,000           75,000     After 9/28/2001
</TABLE>
      Until September 28, 2001, GAFRI's ROPES are senior unsecured obligations
      of GAFRI. 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 GAFRI's senior indebtedness. Given the current interest
      rate environment for these types of securities, GAFRI expects to redeem
      its ROPES in September 2001 using borrowings under its bank line.






                                       12


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


      MINORITY INTEREST EXPENSE Minority interest expense is comprised of (in
      thousands):

                                                               Six months ended
                                                                    June 30,
                                                              ------------------
                                                                 2001       2000
                                                                 ----       ----
            Interest of AFG (parent) and noncontrolling
              shareholders in earnings of subsidiaries        $ 5,128    $ 5,367
            Accrued distributions by subsidiaries on trust
              issued preferred securities, net of tax           5,979      5,980
                                                              -------    -------

                                                              $11,107    $11,347
                                                              =======    =======

H.    SHAREHOLDERS' EQUITY At June 30, 2001 and December 31, 2000, American
      Financial Group beneficially owned all of the outstanding shares of AFC's
      Common Stock.

      PREFERRED STOCK Under provisions of both the Nonvoting (4.0 million shares
      authorized) and Voting (4.0 million shares authorized) Cumulative
      Preferred Stock, the Board of Directors may divide the authorized stock
      into series and set specific terms and conditions of each series. At June
      30 2001 and December 31, 2000, the outstanding voting shares of AFC's
      Preferred Stock consisted of the following:

              SERIES J, no par value; $25.00 liquidating value per share; annual
              dividends per share $2.00; redeemable at AFC's option at $25.75
              per share beginning December 2005 declining to $25.00 at December
              2007 and thereafter; 2,886,161 shares (stated value $72.2 million)
              outstanding at June 30, 2001 and December 31, 2000.
<PAGE>
      The change in unrealized gain (loss) on marketable securities for the six
      months ended June 30 included the following (in millions):
<TABLE>
<CAPTION>
                                                                            Minority
                                                       Pretax      Taxes    Interest      Net
                                                       ------      -----    --------     -----
                        2001
      ---------------------------------------
      <S>                                             <C>          <C>         <C>       <C>
      Unrealized holding losses on securities
        arising during the period                      ($ 3.4)     $ 1.0       ($0.8)    ($ 3.2)
      Realized losses included in net income             33.3      (11.7)       (2.7)      18.9
                                                        -----      -----        ----      -----
      Change in unrealized gain on
        marketable securities, net                      $29.9     ($10.7)      ($3.5)     $15.7
                                                        =====      =====        ====      =====

                        2000
      ---------------------------------------
      Unrealized holding losses on securities
        arising during the period                     ($157.3)     $55.4        $6.7     ($95.2)
      Realized losses included in net income              5.3       (1.9)        (.3)       3.1
                                                       ------      -----        ----      -----
      Change in unrealized gain (loss) on
        marketable securities, net                    ($152.0)     $53.5        $6.4     ($92.1)
                                                       ======      =====        ====      =====

</TABLE>
I.    COMMITMENTS AND CONTINGENCIES There have been no significant changes to
      the matters discussed and referred to in Note M "Commitments and
      Contingencies" of AFC's Annual Report on Form 10-K for 2000.











                                       13


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

                                     ITEM 2

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

      GENERAL

      AFC and American Premier are organized as holding companies with almost
      all of their operations being conducted by subsidiaries. These parent
      corporations, however, have continuing cash needs for administrative
      expenses, the payment of principal and interest on borrowings, shareholder
      dividends, and taxes. Therefore, certain analyses are best done on a
      parent only basis while others are best done on a total enterprise basis.
      In addition, since most of its businesses are financial in nature, AFC
      does not prepare its consolidated financial statements using a
      current-noncurrent format. Consequently, certain traditional ratios and
      financial analysis tests are not meaningful.

      ASBESTOS AND ENVIRONMENTAL RESERVES STUDY Throughout the property and
      casualty insurance industry, estimating ultimate liability for asbestos
      claims has become increasingly uncertain due to inconsistent court
      decisions, recent bankruptcy filings, novel theories of coverage, and
      judicial interpretations that often expand theories of recovery and
      broaden the scope of coverage. The casualty insurance industry as a whole
      is engaged in extensive litigation over these coverage and liability
      issues as the volume and severity of claims against asbestos defendants
      continue to increase. During the second quarter of 2001, AFC experienced
      an increase in the number and severity of these claims, which claims carry
      with them a likelihood for higher than previously established reserves for
      expected claim payments and settlement costs. While management presently
      does not have sufficient information to accurately quantify the level or
      range of any additional exposure, the additional costs of adjudicating or
      settling pending and future claims may materially exceed amounts currently
      established and may be material to the period in which they are recorded.
      Accordingly, AFC is undertaking a current review for asbestos and
      environmental exposures. Any resulting strengthening will be recorded upon
      completion of the review which is expected to take several months. At June
      30, 2001, AFC had recorded $430 million (before reinsurance recoverables
      of $83 million) for various liability coverages related to these
      environmental, asbestos and other mass tort claims.

      IT INITIATIVE In 1999, AFC initiated an enterprise-wide project to study
      its information technology ("IT") resources, needs and opportunities. The
      initiative, involving improvements in physical infrastructure and business
      support systems, entails extensive effort and costs over a period of
      several years. While the costs precede the expected savings, management
      believes the benefits in efficiencies and effectiveness will exceed the
      costs incurred, all of which have been and will be funded through
      available working capital.
<PAGE>
      FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of
      1995 provides a safe harbor for forward-looking statements. Some of the
      forward-looking statements can be identified by the use of forward-looking
      words such as "believes", "expects", "may", "will", "should", "seeks",
      "intends", "plans", "estimates", "anticipates" or the negative version of
      those words or other comparable terminology. Actual results could differ
      materially from those contained in or implied by such forward-looking
      statements for a variety of factors including:

      o changes in economic conditions, including interest rates, performance of
        securities markets, and the availability of capital;
      o regulatory actions;
      o changes in legal environment;

                                       14


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

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

      o judicial decisions and rulings;
      o tax law changes;
      o levels of catastrophes and other major losses;
      o the actual amount of liabilities associated with certain environmental
        and asbestos-related insurance claims;
      o adequacy of loss reserves;
      o availability of reinsurance; and
      o competitive pressures, including the ability to obtain
        rate increases.

      Forward-looking statements speak only as of the date made. AFC undertakes
      no obligations to update any forward-looking statements to reflect events
      or circumstances arising after the date on which they are made.

      LIQUIDITY AND CAPITAL RESOURCES

      RATIOS AFC's debt to total capital ratio at the parent holding company
      level (excluding amounts due AFG) was approximately 13% at June 30, 2001
      and 12% at December 31, 2000. Including amounts due AFG, the ratio was 29%
      at June 30, 2001 and 31% at December 31, 2000.

      AFC's ratio of earnings to fixed charges, excluding and including
      preferred dividends, (on a total enterprise basis) was 2.12 and 1.96 for
      the first six months of 2001 and 2.02 and 1.87 for the entire year of
      2000.

      SOURCES OF FUNDS Management believes the parent holding companies have
      sufficient resources to meet their liquidity requirements, primarily
      through funds generated by their subsidiaries' operations. If funds
      provided by subsidiaries through dividends and tax payments are
      insufficient to meet fixed charges in any period, the holding companies
      would be required to generate cash through borrowings, sales of securities
      or other assets, or similar transactions.

      AFC has a revolving credit agreement with several banks under which it can
      borrow up to $300 million. This credit line provides liquidity and can be
      used to obtain funds for operating subsidiaries or, if necessary, for the
      parent companies. At June 30, 2001, there was $197 million borrowed under
      the line.

      Dividend payments from subsidiaries have been very important to the
      liquidity and cash flow of the individual holding companies during certain
      periods in the past. However, the reliance on such dividend payments has
      been lessened in recent years by the combination of (i) reductions in the
      amounts and cost of debt at the holding companies from historical levels
      (and the related decrease in ongoing cash needs for interest and principal
      payments), (ii) the ability to obtain financing in capital markets, as
      well as (iii) the sales of certain noncore investments.
<PAGE>
      INVESTMENTS Approximately 92% of the fixed maturities held by AFC were
      rated "investment grade" (credit rating of AAA to BBB) by nationally
      recognized rating agencies at June 30, 2001. Investment grade securities
      generally bear lower yields and lower degrees of risk than those that are
      unrated and noninvestment grade. Management believes that the high quality
      investment portfolio should generate a stable and predictable investment
      return.

      AFC's equity securities are concentrated in a relatively limited number of
      major positions. This approach allows management to more closely monitor
      the companies and the industries in which they operate.

                                       15


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

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

      RESULTS OF OPERATIONS

      GENERAL Pretax operating earnings for the three months and six months
      ended June 30, 2001 were $23.4 million and $65.7 million, respectively,
      compared to $30.7 million and $104.3 million in the comparable 2000
      periods. Results for the second quarter of 2000 include special litigation
      charges of $41.3 million, partially offset by a $25 million gain on the
      sale of a subsidiary. Excluding these items, pretax operating earnings
      declined as increased realized losses on securities and a decline in the
      Personal group's underwriting results more than offset improved Specialty
      group underwriting results.

      PROPERTY AND CASUALTY INSURANCE - UNDERWRITING AFC's property and casualty
      group consists of two major business groups: Specialty and Personal.

      The Specialty group includes a highly diversified group of business lines.
      Some of the more significant areas are inland and ocean marine, California
      workers' compensation, agricultural-related coverages, executive and
      professional liability, fidelity and surety bonds, collateral protection,
      and umbrella and excess coverages.

      The Personal group sells nonstandard and preferred/standard private
      passenger auto insurance and, to a lesser extent, homeowners' insurance.
      Nonstandard automobile insurance covers risk not typically accepted for
      standard automobile coverage because of an applicant's driving record,
      type of vehicle, age or other criteria.

      Underwriting profitability is measured by the combined ratio which is a
      sum of the ratios of underwriting losses, loss adjustment expenses,
      underwriting expenses and policyholder dividends to premiums. When the
      combined ratio is under 100%, underwriting results are generally
      considered profitable; when the ratio is over 100%, underwriting results
      are generally considered unprofitable. The combined ratio does not reflect
      investment income, other income or federal income taxes.

      For certain lines of business and products where the credibility of the
      range of loss projections is less certain (primarily the various specialty
      businesses listed above), management believes that it is prudent and
      appropriate to use conservative assumptions until such time as the data,
      experience and projections have more credibility, as evidenced by data
      volume, consistency and maturity of the data. While this practice
      mitigates the risk of adverse development on this business, it does not
      eliminate it.






                                       16


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

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

      Net written premiums and combined ratios for AFC's property and casualty
      insurance subsidiaries were as follows (dollars in millions):
<TABLE>
<CAPTION>
                                            Three months ended        Six months ended
                                                 June 30,                  June 30,
                                           -------------------      --------------------
                                                 2001     2000         2001         2000
                                                 ----     ----         ----         ----
            <S>                                <C>      <C>        <C>          <C>
             Net Written Premiums (GAAP)
             ---------------------------
               Specialty                       $393.8   $335.5     $  750.4(a)  $  633.2
               Personal                         252.0    348.1        622.5        697.9
                                               ------   ------     --------     --------
                                               $645.8   $683.6     $1,372.9     $1,331.1
                                               ======   ======     ========     ========

            Combined Ratios (GAAP) (b)
            ----------------------
               Specialty                        101.3%   104.7%       101.0%       104.2%
               Personal                         111.1    108.4        109.8        106.0
               Aggregate (including
                  discontinued lines)           105.9    106.8        105.7        105.5
</TABLE>

            (a)    Before a reduction of $29.7 million for unearned premium
                   transfer related to the sale of the Japanese division.

            (b)    Combined ratios for the entire year of 2000 were:
                   Specialty - 107.9%, Personal - 108.6%, Aggregate - 108.0%.

      SPECIALTY The Specialty group's increase in net written premiums reflects
      the impact of rate increases implemented in 2000 and 2001 and the
      realization of growth opportunities in certain commercial markets. In its
      California workers' compensation business, AFC implemented rate increases
      in excess of 35% on renewals in the first half 2001. Rate increases
      implemented in the other specialty operations averaged 15% for the first
      six months of 2001. AFC expects these levels of rate increases to continue
      for the remainder of 2001. The improvement in the combined ratio compared
      to the 2000 periods reflects the impact of these rate increases. Excluding
      the California workers' compensation business, the Specialty group's
      combined ratio was 99.7% for the second quarter and 98.8% for the first
      six months of 2001.
<PAGE>
      PERSONAL The Personal group's decline in net written premiums reflects a
      reinsurance agreement, effective April 1, 2001, under which AFC cedes 80%
      of the automobile physical damage business written by three of its
      insurance subsidiaries. This agreement enabled AFC to reallocate some of
      its capital to the more profitable specialty operations. Excluding the
      effect of this agreement, the Personal group's net written premiums
      declined approximately 11% for the second quarter and 3% for the six
      months as lower business volume more than offset the impact of significant
      rate increases. The increase in the combined ratio compared to the 2000
      periods reflects unexpected loss development due to inadequate rates on
      policies written during 2000 and $4.1 million in second quarter 2001 storm
      losses, principally from Hurricane Allison and Midwest hailstorms. To
      further improve underwriting results, AFC implemented rate increases
      averaging 9% in the first six months of 2001 and expects rate increases to
      be at least 15% by the end of 2001.

      LIFE, ACCIDENT AND HEALTH PREMIUMS AND BENEFITS The increase in life,
      accident and health premiums and benefits is due primarily to the
      acquisition of blocks of supplemental health insurance business.






                                       17


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

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

      REAL ESTATE OPERATIONS AFC's subsidiaries are engaged in a variety of real
      estate operations including hotels, apartments, office buildings and
      recreational facilities; they also own several parcels of land. Revenues
      and expenses of these operations, including gains and losses on disposal,
      are included in AFC's statement of earnings as shown below (in millions).
<TABLE>
<CAPTION>
                                             Three months ended       Six months ended
                                                   June 30,               June 30,
                                             ------------------       ----------------
                                                2001       2000          2001     2000
                                                ----       ----          ----     ----
<S>                                            <C>        <C>           <C>      <C>
        Other income                           $29.4      $26.5         $61.4    $44.4
        Other operating and general expenses    16.6       17.0          31.6     31.3
        Interest charges on borrowed money        .6         .6           1.3      1.3
        Minority interest expense, net           1.4         .5           3.3       .7
</TABLE>
      Other income includes net pretax gains on the sale of real estate assets
      of $9.3 million in the second quarter and $24.6 million in the first six
      months of 2001 compared to $4.6 million and $6.7 million for the 2000
      periods.

      OTHER INCOME Excluding gains on the sale of real estate assets (discussed
      above), other income decreased $15.6 million (15%) in the first six months
      of 2001 due primarily to income from the sale of operating assets and
      lease residuals in the first quarter of 2000.

      REALIZED GAINS Realized capital gains have been an important part of the
      return on investments in marketable securities. Individual securities are
      sold creating gains and losses as market opportunities exist.

      Realized losses on securities includes the following provisions for other
      than temporary impairment: second quarter of 2001 and 2000 - $29.2 million
      and $2.5 million; six months of 2001 and 2000 - $37.2 million and $3.3
      million, respectively.

      Under SFAS No. 133, which was adopted as of October 1, 2000, warrants to
      purchase common stock of publicly traded companies are generally
      considered derivatives and marked to market through current earnings as
      realized gains and losses. Realized losses on securities in 2001 includes
      gains of $3.2 million in the second quarter and $2.3 million in the first
      six months to adjust the carrying value of AFC's investment in warrants to
      market value.

      GAIN (LOSS) ON SALES OF SUBSIDIARIES In the first quarter of 2001, AFC
      recognized a $1.6 million pretax loss representing an adjustment to the
      fourth quarter 2000 loss recorded on the sale of its Japanese division. In
      the second quarter of 2000, AFC recognized a $25 million gain representing
      an earn-out related to the 1998 sale of its Commercial lines division.
<PAGE>
      ANNUITY BENEFITS Annuity benefits reflect amounts accrued on annuity
      policyholders' funds accumulated. The majority of GAFRI's fixed rate
      annuity products permit GAFRI to change the crediting rate at any time
      (subject to minimum interest rate guarantees 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. In 2000, annuity
      benefits also includes a second quarter charge of $14.2 million related to
      the settlement of a policyholder class action lawsuit.

      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

                                       18


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q

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

      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 during the second quarter or the first six
      months of 2001.

      INTEREST EXPENSE Interest expense decreased $1.8 million (11%) in the
      second quarter of 2001 as lower average interest rates on AFC's variable
      rate debt and lower average subsidiary indebtedness more than offset
      higher average borrowings under the AFC bank line and the AFG Master
      Credit Agreement. The increase in interest expense for the six months
      reflects higher average indebtedness (including borrowings from AFG),
      partially offset by lower average interest rates on AFC's variable rate
      debt.

      OTHER OPERATING AND GENERAL EXPENSES Other operating and general expenses
      for 2000 include second quarter charges of $18.3 million related to the
      settlement of the policyholder class action lawsuit against a GAFRI
      subsidiary and $8.8 million for an adverse California Supreme Court ruling
      against an AFC property and casualty subsidiary. Excluding these
      litigation charges, other operating and general expenses increased $11.8
      million (11%) in the second quarter and $23.6 million (12%) for the first
      six months of 2001 compared to 2000 due primarily to increased expenses
      associated with the IT initiative and slightly higher holding company
      expenses.

      INVESTEE CORPORATIONS For 2001, equity in earnings (losses) of investee
      corporations represents losses of two start-up manufacturing businesses.
      Equity in net earnings (losses) of investees in 2000 represents AFC's
      proportionate share of Chiquita's earnings. Due to Chiquita's
      restructuring plans, AFG suspended its use of equity accounting and
      reclassified its $24 million investment to "Other stocks" in the balance
      sheet at June 30, 2001.

      RECENT ACCOUNTING STANDARDS In July 2001, the Financial Accounting
      Standards Board issued SFAS No. 141, "Business Combinations", and No. 142,
      "Goodwill and Other Intangible Assets." Under SFAS No. 141, business
      combinations initiated after June 30, 2001 are required to be accounted
      for using the purchase method of accounting. Under SFAS No. 142, goodwill
      will no longer be required to be amortized beginning January 1, 2002, but
      will be subject to an impairment test at least annually. A transitional
      test for impairment is required to be completed in 2002 with any resulting
      writedown reported during the first quarter as a cumulative effect of a
      change in accounting principle. Based on goodwill recorded at June 30,
      2001, management expects that goodwill amortization in 2002 would have
      been approximately $15 million.

<PAGE>
    ------------------------------------------------------------------------

                                     Item 3

             Quantitative and Qualitative Disclosure of Market Risk
             ------------------------------------------------------

      As of June 30, 2001, there were no material changes to the information
      provided in AFC'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.


                                       19


<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q
                                     PART II
                                OTHER INFORMATION


                                     Item 1

                                Legal Proceedings


Reference is made to MD&A - Asbestos and Environmental Reserves Study.


                                     Item 4

               Submission of Matters to a Vote of Security Holders

AFC's Annual Meeting of Shareholders was held on May 24, 2001; the only issue
voted upon was the election of a Board of Directors. Approximately 95% of the
total voting shares (Common and Preferred) were represented at the meeting. The
votes cast for and those withheld are set forth below:

         Name                   For         Against    Withheld     Abstain
         ----                   ---         -------    --------     -------

   Theodore H. Emmerich      12,778,484       N/A       10,775        N/A
   James E. Evans            12,778,484       N/A       10,775        N/A
   Thomas M. Hunt            12,778,349       N/A       10,910        N/A
   Carl H. Lindner           12,777,707       N/A       11,552        N/A
   Carl H. Lindner III       12,778,166       N/A       11,093        N/A
   Keith E. Lindner          12,770,568       N/A       18,691        N/A
   S. Craig Lindner          12,770,568       N/A       18,691        N/A
   William R. Martin         12,778,484       N/A       10,775        N/A


--------------------
N/A - Not Applicable


















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<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q
                                     PART II
                          OTHER INFORMATION - CONTINUED


                                     Item 6

                        Exhibits and Reports on Form 8-K


(a) Exhibit 10 - 2001 Annual Bonus Plan.

(b) Reports on Form 8-K:  none




    ------------------------------------------------------------------------



                                    Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, American
Financial Corporation has duly caused this Report to be signed on its behalf by
the undersigned duly authorized.

                               American Financial Corporation




August 13, 2001                BY:   Fred J. Runk
                                     -----------------------------------
                                     Fred J. Runk
                                     Senior Vice President and Treasurer













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