|                                                       
|-------------------------------------------------------
|                                                       
|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
September 30, 2003 | Commission FileNo. 1-7361
|------------------------------------------------- | -------------------------



AMERICAN FINANCIAL CORPORATION

|Incorporated under
the Laws of Ohio | IRS Employer I.D.
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

Indicate by check mark whether the Registrant is an accelerated filer. Yes     No X       As of November 1, 2003, there were 10,593,000 shares of the Registrant's Common Stock outstanding, all of which were owned by American Financial Group, Inc.















---

AMERICAN FINANCIAL CORPORATION



TABLE OF CONTENTS







|                                                                        | Page
|----------------------------------------------------------------------- | ----
|Part I- Financial Information                                           |     
|Item 1 - Financial Statements:                                          |     
|Consolidated Balance Sheet                                              | 2   
|Consolidated Statement of Earnings                                      | 3   
|Consolidated Statement of Changes in Shareholders' Equity               | 4   
|Consolidated Statement of Cash Flows                                    | 5   
|Notes to Consolidated Financial Statements                              | 6   
|Item  2 - Management's Discussion and Analysis of Financial Condition   |     
|and Results of Operations                                               | 16  
|Item  3 - Quantitative and Qualitative Disclosure of Market Risk        | 28  
|Item  4 - Controls and Procedures                                       | 28  
|                                                                        |     
|Part II- Other Information                                              |     
|Item  1 - Legal Proceedings                                             | 29  
|Item  6 - Exhibits and Reports on Form 8-K                              | 29  
|Signature                                                               | 30  
|                                                                        |     
|Exhibit Index                                                           |     
|Exhibit 12- Computation of Ratio of Earnings to Fixed Charges           | E-1 
|Exhibit 31(a)- Certification of the Chief Executive Officer Pursuant to |     
|Section 302(a) of the Sarbanes-Oxley Act of 2002                        | E-2 
|Exhibit 31(b)- Certification of the Chief Financial Officer Pursuant to |     
|Section 302(a) of the Sarbanes-Oxley Act of 2002                        | E-3 
|Exhibit 32- Certification of the Chief Executive Officer and the        |     
|Chief Financial Officer Pursuant to Section 906 of the                  |     
|Sarbanes-Oxley Act of 2002                                              | E-4 
|                                                                        |     
|                                                                        |     
|                                                                        |     
|                                                                        |     
|                                                                        |     







AMERICAN FINANCIAL CORPORATION 10-Q

PART I

FINANCIAL INFORMATION

AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Dollars In Thousands)

|                                                    | September 30, | December 31,
|--------------------------------------------------- | ------------- | ------------
|                                                    | 2003          | 2002        
|Assets:                                             |               |             
|Cash and short-term investments                     | $   799,886   | $   870,797 
|Investments:                                        |               |             
|Fixed maturities - at market                        |               |             
|(amortized cost - $11,717,287 and $11,549,710)      | 12,209,187    | 12,006,910  
|Other stocks - at market                            |               |             
|(cost - $244,567 and $173,933)                      | 401,367       | 299,133     
|Investment in investee corporations                 | 169,996       | -           
|Policy loans                                        | 215,349       | 214,852     
|Real estate and other investments                   | 264,649       | 257,731     
|Total investments                                   | 13,260,548    | 12,778,626  
|                                                    |               |             
|Recoverables from reinsurers and prepaid            |               |             
|reinsurance premiums                                | 3,003,316     | 2,866,780   
|Agents' balances and premiums receivable            | 571,680       | 708,327     
|Deferred acquisition costs                          | 850,906       | 842,070     
|Other receivables                                   | 382,953       | 306,904     
|Variable annuity assets (separate accounts)         | 509,036       | 455,142     
|Prepaid expenses, deferred charges and other assets | 306,074       | 425,127     
|Goodwill                                            | 169,331       | 248,683     
|                                                    |               |             
|                                                    | $19,853,730   | $19,502,456 
|                                                    |               |             
|Liabilities and Capital:                            |               |             
|Unpaid losses and loss adjustment expenses          | $ 4,793,333   | $ 5,203,831 
|Unearned premiums                                   | 1,670,324     | 1,847,924   
|Annuity benefits accumulated                        | 6,866,953     | 6,453,881   
|Life, accident and health reserves                  | 964,925       | 902,393     
|Payable to reinsurers                               | 404,760       | 508,718     
|Payable to American Financial Group, Inc.           | 443,700       | 310,010     
|Long-term debt:                                     |               |             
|Holding companies                                   | 19,763        | 267,512     
|Subsidiaries                                        | 229,277       | 296,771     
|Variable annuity liabilities (separate accounts)    | 509,036       | 455,142     
|Amounts due brokers for securities purchased        | 505,192       | 23,616      
|Accounts payable, accrued expenses and other        |               |             
|liabilities                                         | 1,040,676     | 1,008,463   
|Total liabilities                                   | 17,447,939    | 17,278,261  
|                                                    |               |             
|Minority interest                                   | 518,766       | 494,472     
|                                                    |               |             
|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                                     | 992,152       | 987,539     
|Retained earnings                                   | 462,394       | 343,705     
|Unrealized gain on marketable securities, net       | 350,700       | 316,700     
|Total shareholders' equity                          | 1,887,025     | 1,729,723   
|                                                    |               |             
|                                                    | $19,853,730   | $19,502,456 

2



AMERICAN FINANCIAL CORPORATION 10-Q



AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EARNINGS

(In Thousands)



|                                       | Three months ended | Nine months ended
|-------------------------------------- | ------------------ | -----------------
|                                       | September 30,      | September 30,    
|                                       | 2003               | 2002             
|Income:                                |                    |                  
|Property and casualty insurance        |                    |                  
|premiums                               | $478,009           | $605,012         
|Life, accident and health premiums     | 83,887             | 80,972           
|Investment income                      | 189,980            | 216,874          
|Realized gains (losses) on:            |                    |                  
|Securities                             | 21,792             | (23,096)         
|Subsidiaries                           | -                  | (10,769)         
|Other income                           | 76,020             | 66,451           
|                                       | 849,688            | 935,444          
|Costs and Expenses:                    |                    |                  
|Property and casualty insurance:       |                    |                  
|Losses and loss adjustment expenses    | 325,014            | 443,625          
|Commissions and other underwriting     |                    |                  
|expenses                               | 132,850            | 158,848          
|Annuity benefits                       | 71,523             | 68,685           
|Life, accident and health benefits     | 62,964             | 69,579           
|Annuity and life acquisition expenses  | 27,457             | 31,112           
|Interest charges on borrowed money     | 8,442              | 12,296           
|Other operating and general expenses   | 140,159            | 102,502          
|                                       | 768,409            | 886,647          
|                                       |                    |                  
|Operating earnings before income taxes | 81,279             | 48,797           
|Provision for income taxes             | 25,697             | 14,555           
|                                       |                    |                  
|Net operating earnings                 | 55,582             | 34,242           
|                                       |                    |                  
|Minority interest expense, net of tax  | (7,176)            | (7,356)          
|Equity in net earnings (losses)        |                    |                  
|of investees, net of tax               | 2,909              | (2,746)          
|Earnings before cumulative effect      |                    |                  
|of accounting change                   | 51,315             | 24,140           
|Cumulative effect of accounting change | -                  | -                
|                                       |                    |                  
|Net Earnings                           | $ 51,315           | $ 24,140         
|                                       |                    |                  

3



AMERICAN FINANCIAL CORPORATION 10-Q



AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

(Dollars in Thousands)



|                                 |           | Common Stock |          | Unrealized |           
|-------------------------------- | --------- | ------------ | -------- | ---------- | ----------
|                                 | Preferred | and Capital  | Retained | Gain on    |           
|                                 | Stock     | Surplus      | Earnings | Securities | Total     
|Balance at January 1, 2003       | $72,154   | $  997,164   | $343,705 | $316,700   | $1,729,723
|                                 |           |              |          |            |           
|Net earnings                     | -         | -            | 121,575  | -          | 121,575   
|Change in unrealized             | -         | -            | -        | 34,000     | 34,000    
|Comprehensive income             |           |              |          |            | 155,575   
|                                 |           |              |          |            |           
|Capital contribution from parent | -         | 7,000        | -        | -          | 7,000     
|Dividends on Preferred Stock     | -         | -            | (2,886)  | -          | (2,886)   
|Other                            | -         | (2,387)      | -        | -          | (2,387)   
|                                 |           |              |          |            |           
|Balance at September 30, 2003    | $72,154   | $1,001,777   | $462,394 | $350,700   | $1,887,025
|                                 |           |              |          |            |           
|                                 |           |              |          |            |           
|                                 |           |              |          |            |           
|                                 |           |              |          |            |           
|                                 |           |              |          |            |           
|Balance at January 1, 2002       | $72,154   | $  993,750   | $255,127 | $156,900   | $1,477,931
|                                 |           |              |          |            |           
|Net earnings                     | -         | -            | 46,300   | -          | 46,300    
|Change in unrealized             | -         | -            | -        | 156,700    | 156,700   
|Comprehensive income             |           |              |          |            | 203,000   
|                                 |           |              |          |            |           
|Capital contribution from parent | -         | 4,600        | -        | -          | 4,600     
|Dividends on Preferred Stock     | -         | -            | (2,886)  | -          | (2,886)   
|Other                            | -         | 256          | -        | -          | 256       
|                                 |           |              |          |            |           
|Balance at September 30, 2002    | $72,154   | $  998,606   | $298,541 | $313,600   | $1,682,901





4



AMERICAN FINANCIAL CORPORATION 10-Q

AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(In Thousands)

|                                                           | Nine months ended
|---------------------------------------------------------- | -----------------
|                                                           | September 30,    
|                                                           | 2003             
|Operating Activities:                                      |                  
|Net earnings                                               | $  121,575       
|Adjustments:                                               |                  
|Cumulative effect of accounting change                     | -                
|Equity in net (earnings) losses of investees               | (5,883)          
|Minority interest                                          | 12,454           
|Depreciation and amortization                              | 134,386          
|Annuity benefits                                           | 227,230          
|Realized (gains) losses on investing activities            | (19,672)         
|Deferred annuity and life policy acquisition costs         | (118,765)        
|Increase in reinsurance and other receivables              | (404,077)        
|Decrease (increase) in other assets                        | 31,823           
|Increase in insurance claims and reserves                  | 620,421          
|Increase (decrease) in payable to reinsurers               | (25,156)         
|Increase in other liabilities                              | 50,283           
|Dividends from investees                                   | 864              
|Other, net                                                 | 6,529            
|                                                           | 632,012          
|                                                           |                  
|Investing Activities:                                      |                  
|Purchases of and additional investments in:                |                  
|Fixed maturity investments                                 | (5,901,447)      
|Equity securities                                          | (113,409)        
|Subsidiary                                                 | -                
|Real estate, property and equipment                        | (22,994)         
|Maturities and redemptions of fixed maturity               |                  
|investments                                                | 1,428,014        
|Sales of:                                                  |                  
|Fixed maturity investments                                 | 3,615,671        
|Equity securities                                          | 36,464           
|Subsidiaries                                               | 247,380          
|Real estate, property and equipment                        | 14,236           
|Cash and short-term investments of acquired                |                  
|(former) subsidiaries, net                                 | (112,666)        
|Collection of receivable from investee                     | 55,000           
|Decrease in other investments                              | 531              
|                                                           | (753,220)        
|Financing Activities:                                      |                  
|Fixed annuity receipts                                     | 592,806          
|Annuity surrenders, benefits and withdrawals               | (417,590)        
|Net transfers from variable annuity assets                 | 4,061            
|Additional long-term borrowings                            | 43,320           
|Reductions of long-term debt                               | (358,905)        
|Borrowings from AFG                                        | 173,500          
|Payments to AFG                                            | (37,600)         
|Issuances of trust preferred securities                    | 33,943           
|Subsidiary's issuance of stock in rights offering          | 10,632           
|Capital contribution                                       | 7,000            
|Cash dividends paid                                        | (2,886)          
|Other, net                                                 | 2,016            
|                                                           | 50,297           
|                                                           |                  
|Net Increase (Decrease) in Cash and Short-term Investments | (70,911)         
|                                                           |                  
|Cash and short-term investments at beginning of period     | 870,797          
|                                                           |                  
|Cash and short-term investments at end of period           | $  799,886       

5



AMERICAN FINANCIAL CORPORATION 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

_________________________________________________________________________________

INDEX TO NOTES



|A. | Accounting Policies                    | G. | Long-Term Debt               
|-- | -------------------------------------- | -- | -----------------------------
|B. | Acquisitions and Sales of Subsidiaries | H. | Minority Interest            
|C. | Segments of Operations                 | I. | Shareholders' Equity         
|D. | Investment in Investees                | J. | Commitments and Contingencies
|E. | Goodwill                               | K. | Subsequent Events            
|F. | Payable to American Financial Group    |    |                              

_____________________________________________________________________________________________________

1. Accounting Policies
2. Acquisitions and Sales of Subsidiaries
3. Segments of Operations

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.



|                                                                                         | Three months ended | Nine months ended
|---------------------------------------------------------------------------------------- | ------------------ | -----------------
|                                                                                         | September 30,      | September 30,    
|                                                                                         | 2003               | 2002             
|Revenues (a)                                                                             |                    |                  
|Property and casualty insurance:                                                         |                    |                  
|Premiums earned:                                                                         |                    |                  
|Specialty                                                                                | $462,798           | $403,738         
|Personal                                                                                 | 15,201             | 201,290          
|Other lines                                                                              | 10                 | (16)             
|                                                                                         | 478,009            | 605,012          
|Investment income                                                                        | 59,619             | 82,380           
|Realized gains (losses)                                                                  | 19,995             | (15,785)         
|Other income                                                                             | 45,291             | 32,601           
|                                                                                         | 602,914            | 704,208          
|Annuities, life and health (b)                                                           | 241,400            | 225,787          
|Other (c)                                                                                | 5,374              | 5,449            
|                                                                                         | $849,688           | $935,444         
|                                                                                         |                    |                  
|Operating Profit (Loss)                                                                  |                    |                  
|Property and casualty insurance:                                                         |                    |                  
|Underwriting:                                                                            |                    |                  
|Specialty                                                                                | $ 23,963           | $  4,706         
|Personal                                                                                 | (2,697)            | (2,223)          
|Other lines (d)                                                                          | (1,121)            | 56               
|                                                                                         | 20,145             | 2,539            
|Investment and other income (e)                                                          | 35,354             | 45,259           
|                                                                                         | 55,499             | 47,798           
|Annuities, life and health                                                               | 34,047             | 7,387            
|Other (c)                                                                                | (8,267)            | (6,388)          
|                                                                                         | $ 81,279           | $ 48,797         
|                                                                                         |                    |                  
|(a)  Revenues include sales of products and services as well as other                   
|income earned by the respective segments.                                               
|(b)  Investment income comprises approximately three-fifths of these revenues.  Includes
|impairment charges of $27.7 million and $68.7 million for the quarter and nine months   
|ended September 30, 2002.                                                               
|(c)  Other revenues and operating profit (loss) for the nine months ended September 30, 
|2003, include a loss of $45.9 million on the public offering of Infinity.               
|Operating profit (loss) includes holding company expenses.                              
|(d)  Represents development of lines in "run-off" and includes a pretax charge          
|of $43.8 million in the first nine months of 2003 for an arbitration                    
|decision relating to a 1995 property claim from a discontinued business;                
|AFC has ceased underwriting new business in these operations.                           
|(e)  Includes a third quarter 2003 pretax charge of $35.5 million related to            
|the settlement of litigation.  See Legal Proceedings in Item 1 of Part II.              

11



AMERICAN FINANCIAL CORPORATION 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED





Equity in Infinity's net earnings was $3.8 million for the third quarter and $8.3 million for the first nine months of 2003.  Summarized financial information for Infinity is shown below for the nine months ended September 30, 2003 (in millions).



|Earned premiums | $504.2
|--------------- | ------
|Total revenues  | 551.3 
|Net earnings    | 38.8  
|                |       

Equity in net earnings (losses) of investees for the first nine months of 2002 represents AFC's share of the losses from two start-up manufacturing businesses that were formerly subsidiaries.  One of these businesses was sold in the fourth quarter of 2002; equity in the net loss of the remaining business was $855,000 for the third quarter and $2.4 million for the first nine months of 2003.

Substantially all of the $79.4 million decrease in goodwill during the first nine months of 2003 related to the sale of subsidiaries in AFC's Personal segment.

Included in deferred acquisition costs in AFC's Balance Sheet are $64.4 million and $66.8 million at September 30, 2003, and December 31, 2002, respectively, representing the present value of future profits ("PVFP") related to acquisitions by AFC's annuity and life business.  The PVFP amounts are net of $63.5 million and $57.3 million of accumulated amortization.  Amortization of the PVFP was $1.9 million in the third quarter and $6.2 million in the first nine months of 2003 and $4.9 million in the third quarter and $8.5 million in the first nine months of 2002.  During each of the next five years, the PVFP is expected to decrease at a rate of approximately 13% of the balance at the beginning of each respective year.



12



AMERICAN FINANCIAL CORPORATION 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED







|                                            | September 30, | December 31,
|------------------------------------------- | ------------- | ------------
|                                            | 2003          | 2002        
|Holding Companies:                          |               |             
|AFC notes payable under bank line           | $   -         | $248,000    
|APU 10-7/8% Subordinated Notes due May 2011 | 11,449        | 11,498      
|Other                                       | 8,314         | 8,014       
|                                            |               |             
|                                            | $ 19,763      | $267,512    
|Subsidiaries:                               |               |             
|GAFRI 6-7/8% Senior Notes due June 2008     | $100,000      | $100,000    
|GAFRI notes payable under bank line         | 90,600        | 148,600     
|Notes payable secured by real estate        | 27,205        | 35,610      
|Other                                       | 11,472        | 12,561      
|                                            |               |             
|                                            | $229,277      | $296,771    
|                                            |               |             

At September 30, 2003, scheduled principal payments on debt for the balance of 2003 and the subsequent five years (adjusted to reflect GAFRI's paydown of its bank line in November)were as follows (in millions):



|     | Holding   |              |       
|---- | --------- | ------------ | ------
|     | Companies | Subsidiaries | Total 
|2003 | $  -      | $   .4       | $   .4
|2004 | -         | 2.0          | 2.0   
|2005 | -         | 11.2         | 11.2  
|2006 | -         | 19.4         | 19.4  
|2007 | 5.4       | .1           | 5.5   
|2008 | -         | 100.1        | 100.1 
|     |           |              |       

AFC's credit line provides up to $280 million of availability.  The line consists of two facilities:  a 364-day revolving facility, extendable annually, for one-third of the total line and a three-year revolving facility for the remaining two-thirds with a final maturity in November 2005.  Amounts borrowed bear interest at rates ranging from 1.25% to 2.25% over LIBOR based on AFG's credit rating.  In addition, GAFRI has an unsecured credit agreement under which it can borrow up to $155 million at floating rates based on prime or Eurodollar rates through December 2004.  See Note K - "Subsequent Events - GAFRI Debt Offering."

13



AMERICAN FINANCIAL CORPORATION 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED







|                                            | September 30, | December 31,
|------------------------------------------- | ------------- | ------------
|                                            | 2003          | 2002        
|Interest of AFG (parent) and noncontrolling |               |             
|shareholders in subsidiaries' common stock  | $375,853      | $351,559    
|Preferred securities issued by consolidated |               |             
|subsidiary trusts                           | 142,913       | 142,913     
|                                            | $518,766      | $494,472    
|                                            |               |             

Preferred Securities

The preferred securities consisted of the following at September 30, 2003 (in thousands):



|Date of       |                            | Amount      | Optional            
|------------- | -------------------------- | ----------- | --------------------
|Issuance      | Issue (Maturity Date)      | Outstanding | Redemption Dates    
|November 1996 | GAFRI  9-1/4% TOPrS (2026) | $72,913     | Currently redeemable
|March 1997    | GAFRI  8-7/8% Pfd   (2027) | 70,000      | On or after 3/1/2007

In May 2003, a GAFRI subsidiary and a 68%-owned subsidiary of Great American Insurance issued an aggregate of $35 million in trust preferred securities maturing in 2033.  In accordance with FIN 46, variable interest entities that issue preferred securities subsequent to January 31, 2003, are not consolidated for reporting purposes.  The $35 million in subordinated debt due these trusts is included in "Accounts payable, accrued expenses and other liabilities".

Minority Interest Expense



|                                          |                  
|----------------------------------------- | -----------------
|                                          | Nine months ended
|                                          | September 30,    
|                                          | 2003             
|Interest of AFG parent and noncontrolling |                  
|shareholders in earnings of subsidiaries  | $12,454          
|Accrued distributions by consolidated     |                  
|subsidiaries on preferred                 |                  
|securities, net of tax                    | 6,390            
|                                          | $18,844          
|                                         

14



AMERICAN FINANCIAL CORPORATION 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED





Preferred Stock



|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 September 30, 2003, and December 31, 2002.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Sale of Transport

GAFRI Debt Offering

Planned Sale of Remaining Infinity Shares

15



AMERICAN FINANCIAL CORPORATION 10-Q



ITEM 2

Management's Discussion and Analysis

of Financial Condition and Results of Operations

_________________________________________________________________________________

INDEX TO MD&A



|                                | Page |                             | Page
|------------------------------- | ---- | --------------------------- | ----
|General                         | 16   | Results of Operations       | 22  
|Forward-Looking Statements      | 16   | General                     | 22  
|Critical Accounting Policies    | 17   | Income Items                | 22  
|Liquidity and Capital Resources | 17   | Expense Items               | 25  
|Ratios                          | 17   | Other Items                 | 26  
|Sources of Funds                | 17   | Recent Accounting Standards | 27  
|Investments                     | 17   |                             |     
|Uncertainties                   | 20   |                             |     

_____________________________________________________________________________________________________

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.

Forward-Looking Statements

Actual results could differ materially from those contained in or implied by such forward-looking statements for a variety of factors including:

- changes in economic conditions, including interest rates, performance of securities markets, and the availability of capital;
- regulatory actions;
- changes in legal environment;
- tax law changes;
- levels of natural catastrophes, terrorist events, incidents of war and other major losses;
- the ultimate amount of liabilities associated with certain asbestos and environmental-related claims;
- the unpredictability of possible future litigation if certain settlements do not become effective;
- adequacy of insurance reserves;
- trends in mortality and morbidity;
- availability of reinsurance and ability of reinsurers to pay their obligations;
- competitive pressures, including the ability to obtain rate increases; and
- changes in debt and claims paying ratings.

The forward-looking statements herein are made only as of the date of this report.  AFC assumes no obligation to publicly update any forward-looking statements.

16



AMERICAN FINANCIAL CORPORATION 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued





Critical Accounting Policies

Significant accounting policies are summarized in Note A to the financial statements.  The preparation of financial statements requires management to make estimates and assumptions that can have a significant effect on amounts reported in the financial statements.  As more information becomes known, these estimates and assumptions could change and thus impact amounts reported in the future.  Management believes that the establishment of insurance reserves, especially asbestos and environmental-related reserves, and the determination of "other than temporary" impairment on investments are the two areas where the degree of judgment required to determine amounts recorded in the financial statements make the accounting policies critical.  For further discussion of these policies, see "Liquidity and Capital Resources - Investments"and"Liquidity and Capital Resources - Uncertainties."

LIQUIDITY AND CAPITAL RESOURCES

Ratios

AFC's ratio of earnings to fixed charges including annuity benefits as a fixed charge, excluding and including preferred dividends, was 1.63 and 1.60 for the nine months ended September 30, 2003, and 1.48 and 1.46 for the entire year of 2002.  Excluding annuity benefits, this ratio was 4.41 and 3.94, for the nine months of 2003 and 3.36 and 3.09 for the year 2002, respectively.  Although the ratio excluding interest on annuities is not required or encouraged to be disclosed under Securities and Exchange Commission rules, it is presented because interest credited to annuity policyholder accounts is not always considered a borrowing cost for an insurance company.

Sources of Funds

AFC's bank credit line consists of two facilities:  a 364-day revolving facility, extendable annually, for one-third of the total line and a three-year revolving facility for the remaining two-thirds.  Amounts borrowed bear interest at rates ranging from 1.25% to 2.25% over LIBOR based on AFG's credit rating.  This credit agreement provides ample liquidity and can be used to obtain funds for operating subsidiaries or, if necessary, for the parent companies.  In June 2003, borrowings from AFG under the Master Credit Agreement were used to pay down the bank line.  While the credit line provides up to $280 million of availability, there were no borrowings outstanding at September 30, 2003.

Investments

17



AMERICAN FINANCIAL CORPORATION 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued



Approximately 93% of the fixed maturities held by AFC at September 30, 2003, were rated "investment grade" (credit rating of AAA to BBB) by nationally recognized rating agencies.  Investment grade securities generally bear lower yields and lower degrees of risk than those that are unrated and noninvestment grade.  Management believes that a high quality investment portfolio is more likely to generate a stable and predictable investment return.

Individual portfolio securities are sold creating gains or losses as market opportunities exist.  Since all of these securities are carried at market value in the balance sheet, there is virtually no effect on liquidity or financial condition upon the sale and ultimate realization of unrealized gains and losses.

Summarized information for the unrealized gains and losses recorded in AFC's balance sheet at September 30, 2003, is shown in the following table (dollars in millions).  Approximately $138 million of "Fixed maturities" and $34 million of "Other stocks" had no unrealized gains or losses at September 30, 2003.



|                                              | Securities | Securities
|--------------------------------------------- | ---------- | ----------
|                                              | With       | With      
|                                              | Unrealized | Unrealized
|                                              | Gains      | Losses    
|Fixed Maturities                              |            |           
|Market value of securities                    | $9,494     | $2,577    
|Amortized cost of securities                  | $8,934     | $2,645    
|Gross unrealized gain (loss)                  | $  560     | ($   68)  
|Market value as % of amortized cost           | 106%       | 97%       
|Number of security positions                  | 1,801      | 286       
|Number individually exceeding                 |            |           
|$2 million gain or loss                       | 19         | 4         
|Concentration of gains (losses) by            |            |           
|type or industry (exceeding 5% of             |            |           
|unrealized):                                  |            |           
|Mortgage-backed securities                    | $ 69.3     | ($ 22.3)  
|Electric services                             | 53.9       | (1.6)     
|Banks and savings institutions                | 48.8       | (.4)      
|U.S. government and government agencies       | 35.8       | (2.5)     
|State and municipal                           | 34.7       | (5.0)     
|Telephone communications                      | 28.4       | -         
|Asset-backed securities                       | 15.7       | (7.3)     
|Air transportation (generally collateralized) | 5.5        | (13.2)    
|Percentage rated investment grade             | 94%        | 91%       
|                                              |            |           
|Other Stocks                                  |            |           
|Market value of securities                    | $  322     | $   45    
|Cost of securities                            | $  162     | $   48    
|Gross unrealized gain (loss)                  | $  160     | ($    3)  
|Market value as % of cost                     | 199%       | 94%       
|Number individually exceeding                 |            |           
|$2 million gain or loss                       | 5          | -         
|                                              |            |           

18



AMERICAN FINANCIAL CORPORATION 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued



AFC's investment in equity securities of Provident Financial Group, a Cincinnati-based commercial banking and financial services company, represents $131 million of the $160 million in unrealized gains on other stocks at September 30, 2003.

The table below sets forth the scheduled maturities of fixed maturity securities at September 30, 2003, based on their market values.  Asset backed securities and other securities with sinking funds are reported at average maturity.  Actual maturities may differ from contractual maturities because certain securities may be called or prepaid by the issuers.



|                                   | Securities | Securities
|---------------------------------- | ---------- | ----------
|                                   | With       | With      
|                                   | Unrealized | Unrealized
|                                   | Gains      | Losses    
|Maturity                           |            |           
|One year or less                   | 3%         | 1%        
|After one year through five years  | 24         | 22        
|After five years through ten years | 36         | 13        
|After ten years                    | 13         | 8         
|                                   | 76         | 44        
|Mortgage-backed securities         | 24         | 56        
|                                   | 100%       | 100%      

AFC realized aggregate losses of $4 million during the first nine months of 2003 on $36.1 million in sales of fixed maturity securities (7 issues/issuers) that had individual unrealized losses greater than $500,000 at December 31, 2002.  Market values of five of the issues increased an aggregate of $4.7 million from December 31 to date of sale.  The market value of the remaining two securities decreased $316,000 from December 31 to the sale date.

Although AFC had the ability to continue holding these investments, its intent to hold them changed due primarily to deterioration in the issuers' creditworthiness, decisions to lessen exposure to a particular credit or industry, or to modify asset allocation within the portfolio.

The table below (dollars in millions) summarizes the unrealized gains and losses on fixed maturity securities by dollar amount.



|                                       |           |             |          
|-------------------------------------- | --------- | ----------- | ---------
|                                       |           |             | Market   
|                                       | Aggregate | Aggregate   | Value as 
|                                       | Market    | Unrealized  | % of Cost
|                                       | Value     | Gain (Loss) | Basis    
|Fixed Maturities at September 30, 2003 |           |             |          
|                                       |           |             |          
|Securities with unrealized gains:      |           |             |          
|Exceeding $500,000 (372 issues)        | $4,490    | $378        | 109.2%   
|Less than $500,000 (1,429 issues)      | 5,004     | 182         | 103.8    
|                                       | $9,494    | $560        | 106.3%   
|                                       |           |             |          
|Securities with unrealized losses:     |           |             |          
|Exceeding $500,000 (40 issues)         | $  772    | ($ 45)      | 94.5%    
|Less than $500,000 (246 issues)        | 1,805     | (23)        | 98.7     
|                                       | $2,577    | ($ 68)      | 97.4%    
|                                       |           |             |          

19



AMERICAN FINANCIAL CORPORATION 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued



The following table summarizes (dollars in millions) the unrealized loss for all fixed maturity securities with unrealized losses by issuer quality and length of time those securities have been in an unrealized loss position.



|                                      |           |             |          
|------------------------------------- | --------- | ----------- | ---------
|                                      |           |             | Market   
|                                      | Aggregate | Aggregate   | Value as 
|                                      | Market    | Unrealized  | % of Cost
|                                      | Value     | Gain (Loss) | Basis    
|Fixed Maturities with Unrealized      |           |             |          
|Losses at September 30, 2003          |           |             |          
|                                      |           |             |          
|Investment grade with losses for:     |           |             |          
|Less than 6 months (169 issues)       | $2,156    | ($27)       | 98.8%    
|7 to 12 months (25 issues)            | 130       | (7)         | 94.9     
|Greater than 12 months (20 issues)    | 66        | (7)         | 90.4     
|                                      | $2,352    | ($41)       | 98.3%    
|                                      |           |             |          
|Non-investment grade with losses for: |           |             |          
|Less than 6 months (20 issues)        | $   55    | ($ 1)       | 98.2%    
|7 to 12 months (9 issues)             | 24        | (  1)       | 96.0     
|Greater than 12 months (43 issues)    | 146       | (25)        | 85.4     
|                                      | $  225    | ($27)       | 89.3%    
|                                      |           |             |          

When a decline in the value of a specific investment is considered to be "other than temporary," a provision for impairment is charged to earnings (accounted for as a realized loss) and the cost basis of that investment is reduced.  The determination of whether unrealized losses are "other than temporary" requires judgment based on subjective as well as objective factors.  A listing of factors considered and resources used is contained in the discussion of "Investments" under Management's Discussion and Analysis in AFC's 2002 Form 10-K.

Based on its analysis, management believes (i) AFC will recover its cost basis in the securities with unrealized losses and (ii) that AFC has the ability and intent to hold the securities until they mature or recover in value.  Should either of these beliefs change with regard to a particular security, a charge for impairment would likely be required.  While it is not possible to accurately predict if or when a specific security will become impaired, charges for other than temporary impairment could be material to results of operations in a future period.  Management believes it is not likely that future impairment charges will have a significant effect on AFC's liquidity.

Uncertainties

Property and Casualty Insurance Reserves

20



AMERICAN FINANCIAL CORPORATION 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued



Estimating the liability for unpaid losses and LAE is inherently judgmental and is influenced by factors which are subject to significant variation.  Through the use of analytical reserve development techniques, management utilizes items such as the effect of inflation on medical, hospitalization, material, repair and replacement costs, general economic trends and the legal environment.

While current factors and reasonably likely changes in variable factors are considered in estimating the liability for unpaid losses, there is no method or system which can eliminate the risk of actual ultimate results differing from such estimates.  As shown in the reserve development table (loss triangle) on page 13 of AFC's 2002 Form 10-K, the original estimates of AFC's liability for losses and loss adjustment expenses, net of reinsurance, over the past 10 years has developed through December 31, 2002, to be deficient (for two years) by as much as 4.3% and redundant (for 8 years) by as much as 8.0% (excluding the effect of special charges for asbestos and environmental exposures).  AFC believes this development illustrates the variability in factors considered in estimating its insurance reserves.

Quarterly reviews of unpaid loss and LAE reserves are prepared using standard actuarial techniques.  These may include:  Case Incurred Development Method; Paid Development Method; Bornhuetter-Ferguson Method; and Incremental Paid LAE to Paid Loss Methods.  Generally, data is segmented by major product or coverage within product using countrywide data; however, in some situations data may be reviewed by state for large volume states.

Asbestos and Environmental-related ("A&E") Reserves

While management believes that AFC's reserves for A&E claims are a reasonable estimate of ultimate liability for such claims, actual results may vary materially from the amounts currently recorded due to the difficulty in predicting the number of future claims and the impact of recent bankruptcy filings, and unresolved issues such as whether coverage exists, whether policies are subject to aggregate limits on coverage, whether claims are to be allocated among triggered policies and implicated years, and whether claimants who exhibit no signs of illness will be successful in pursuing their claims.

21



AMERICAN FINANCIAL CORPORATION 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued



In February 2003, Great American Insurance Company entered into an agreement for the settlement of asbestos related coverage litigation under insurance polices issued during the 1970's and 1980's to Bigelow-Liptak Corporation and related companies, subsequently known as A.P. Green Industries, Inc. ("A.P. Green").  Management believes that this settlement will enhance financial certainty and provides resolution to litigation that represents AFC's largest known asbestos-related claim and the only such claim that management believes to be material.

The settlement is for $123.5 million (Great American has the option to pay in cash or over time with 5.25% interest), all of which is covered by reserves established prior to 2003, and anticipated reinsurance recoverables for this matter.  The agreement allows up to 10% of the settlement to be paid in AFG common stock.

The settlement has received the approval of the bankruptcy court supervising the reorganization of A.P. Green.  It remains subject to the confirmation of a plan of reorganization by the bankruptcy court that includes an injunction prohibiting the assertion against Great American of any present or future asbestos personal injury claims under policies issued to A.P. Green and related companies.  This process should be complete in 2004.  No assurance can be made that a plan of reorganization will be confirmed; no payments are required until completion of the process.  If there is no plan confirmation, the outcome of this litigation will again be subject to the complexities and uncertainties associated with a Chapter 11 proceeding and asbestos coverage litigation.

RESULTS OF OPERATIONS

General

Operating earnings before income taxes increased $32.5 million in the third quarter of 2003 compared to the same period in 2002 due primarily to a $55.7 million improvement in realized gains and $17.6 million improvement in property and casualty underwriting results, which more than offset a third quarter $35.5 million pretax charge related to a litigation settlement and a $26.9 million decrease in investment income due primarily to the sale of Infinity and lower yields on fixed maturity securities.

Nine-month pretax operating earnings improved $49.5 million compared to 2002 reflecting a $109.4 million increase in realized gains and $62.6 million increase in property and casualty underwriting results (excluding a second quarter arbitration charge), which more than offset the third quarter litigation settlement charge, a second quarter $43.8 million arbitration charge relating to a 1995 property claim, a $70.3 million decrease in investment income and a second quarter $12.5 million charge related to the narrowing of spreads on fixed annuities.

Property and Casualty Insurance - Underwriting

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

22



AMERICAN FINANCIAL CORPORATION 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued





liability, fidelity and surety bonds, collateral protection, and umbrella and excess coverages.

The Personal group wrote 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.

Performance measures such as segment underwriting profit or loss and related combined ratios are often used by property and casualty insurers to help users of their financial statements better understand the company's performance.  See Note C - "Segments of Operations" for the detail of AFC's operating profit by significant business segment.

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.

Premiums and combined ratios for AFC's property and casualty insurance subsidiaries were as follows (dollars in millions):



|                                                                                                                                                                                                                                                                                                                     | Three months ended | Nine months ended
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | -----------------
|                                                                                                                                                                                                                                                                                                                     | September 30,      | September 30,    
|                                                                                                                                                                                                                                                                                                                     | 2003               | 2002             
|Gross Written Premiums (GAAP)                                                                                                                                                                                                                                                                                        |                    |                  
|Specialty                                                                                                                                                                                                                                                                                                            | $1,006.0           | $  839.5         
|Personal (a)                                                                                                                                                                                                                                                                                                         | 51.1               | 280.7            
|Other lines                                                                                                                                                                                                                                                                                                          | -                  | -                
|                                                                                                                                                                                                                                                                                                                     | $1,057.1           | $1,120.2         
|                                                                                                                                                                                                                                                                                                                     |                    |                  
|Net Written Premiums (GAAP)                                                                                                                                                                                                                                                                                          |                    |                  
|Specialty                                                                                                                                                                                                                                                                                                            | $  523.7           | $  474.2         
|Personal (a)                                                                                                                                                                                                                                                                                                         | 12.7               | 150.9            
|Other lines                                                                                                                                                                                                                                                                                                          | -                  | -                
|                                                                                                                                                                                                                                                                                                                     | $  536.4           | $  625.1         
|                                                                                                                                                                                                                                                                                                                     |                    |                  
|Combined Ratios (GAAP)                                                                                                                                                                                                                                                                                               |                    |                  
|Specialty (b)                                                                                                                                                                                                                                                                                                        | 94.8%              | 98.8%            
|Personal                                                                                                                                                                                                                                                                                                             | 117.7              | 101.2            
|Aggregate (including                                                                                                                                                                                                                                                                                                 |                    |                  
|discontinued lines)(c)                                                                                                                                                                                                                                                                                               | 95.8               | 99.6             
|                                                                                                                                                                                                                                                                                                                     |                    |                  
|(a)  Includes the operations of Infinity through the sale date in mid-
         February 2003 and the direct auto business through its sale at the end
         of April 2003.  In 2003, gross written premiums includes personal lines
         business written by Great American Insurance and ceded to Infinity.
|(b)  Favorably impacted by 2.2 points and 0.8 points for the third
         quarter and nine months of 2003, respectively, for the effect of a
         benefit related to recently enacted California workers' compensation
         legislation.                                                                  
|(c)  Includes 3.1 points for the nine months of 2003 for the effect of an
         arbitration decision relating to a claim arising from a discontinued
         business.                                                                                                                                          

23



AMERICAN FINANCIAL CORPORATION 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued



Specialty

The Specialty group reported an underwriting profit of $24.0 million for the 2003 third quarter with a combined ratio of 94.8% and $50.7 million for the first nine months with a combined ratio of 96.1%, improvements of 4.0 and 2.3 points, respectively, over the comparable 2002 periods.  The group's third quarter underwriting results include a pretax benefit of $10 million related to recently enacted California workers' compensation legislation.

Personal

Arbitration Settlement

Investment Income

Realized Gains

Gains (Losses) on Securities

Realized losses on securities include net gains of $1.9 million in the third quarter of 2003 and net losses of $1.9 million in the first nine months of 2003 compared to losses of $7.5 million (third quarter) and $6.9 million (nine months) in the 2002 periods to adjust the carrying value of AFC's investment in warrants to market value.

24



AMERICAN FINANCIAL CORPORATION 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued





Gains (Losses) on Sales of Subsidiaries

Real Estate Operations



|                                     | Three months ended | Nine months ended
|------------------------------------ | ------------------ | -----------------
|                                     | September 30,      | September 30,    
|                                     | 2003               | 2002             
|Other income                         | $32.3              | $26.0            
|Other operating and general expenses | 21.0               | 19.8             
|Interest charges on borrowed money   | .5                 | .6               
|Minority interest expense, net       | 1.6                | .5               
|                                     |                    |                  

Other income includes net pretax gains on the sale of real estate assets of $4.7 million in the third quarter and $9.4 million in the first nine months of 2003 compared to $87,000 and $7.7 million for the 2002 periods.

Other Income

Annuity Benefits

The majority of GAFRI's fixed annuity products permit GAFRI to change the crediting rate at any time subject to minimum interest rate guarantees (as determined by applicable law).  Approximately 45% of the annuity benefits

25



AMERICAN FINANCIAL CORPORATION 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued



accumulated relate to policies that have a minimum guarantee of 3%; the balance have a guarantee of 4%.  In states where required approvals have been received,  GAFRI has begun issuing products with guaranteed minimum crediting rates of 1.5% beginning in the fourth quarter of 2003.  Historically, management has been able to react to changes in market interest rates and maintain a desired interest rate spread.

Annuity and Life Acquisition Expenses

The increase in annuity and life acquisition expenses in the first nine months of 2003 compared to 2002 reflects an increase in in-force policies, primarily in the annuities and supplemental insurance operations.

The vast majority of GAFRI's DPAC asset relates to its fixed annuity, variable annuity and life insurance lines of business.  Continued spread compression, decreases in the stock market and adverse mortality could lead to write-offs of DPAC in the future.  However, absent significant deterioration in those factors, GAFRI does not anticipate any material write-offs in the foreseeable future.

Interest on Borrowed Money

Other Operating and General Expenses

Income Taxes

Investee Corporations

Infinity Property and Casualty Corporation

Start-up Manufacturing Businesses

26



AMERICAN FINANCIAL CORPORATION 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued



third quarter and $2.8 million for the first nine months of 2002 in losses of one of these businesses.  Investee losses in 2002 include $1.7 million in the third quarter and $5.0 million in the first nine months in losses of the other manufacturing business, which sold substantially all of its assets in December 2002.

Cumulative Effect of Accounting Change

RECENT ACCOUNTING STANDARDS

Interpretation No. 46

See Note A - "Accounting Policies - Minority Interest" and Note H - "Minority Interest" for the effect of implementing FIN 46 with respect to AFC's trust preferred securities.

While AFC continues to assess the application of FIN 46 and the FASB continues to issue additional guidance, management believes AFC will be required to consolidate its investments in two collateralized debt obligations ("CDOs"), for which AFC also acts as investment manager.  Under the CDOs, securities were issued in various senior and subordinate classes and the proceeds were invested primarily in bank loans, and to a lesser extent, high yield bonds, all of which serve as collateral for the securities issued by the CDOs.  None of the

collateral was purchased from AFC.  The market value of the collateral at September 30, 2003, was approximately $850 million.

AFC's investments in the two CDOs are subordinate to the senior classes (approximately 92% of the total securities) issued by the CDOs.  To the extent there are defaults and unrecoverable losses on the underlying collateral resulting in reduced cash flows, AFC's class would bear losses first.  Holders of the CDO debt securities have no recourse against AFC for the liabilities of the CDOs; accordingly, AFC's exposure to loss on these investments is limited to its investment.  AFC's investments in the CDOs are carried at estimated market value of $10.1 million at September 30, 2003, which is included in fixed maturities in AFC's balance sheet.

27



AMERICAN FINANCIAL CORPORATION 10-Q



Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued



SOP 03-1

GAFRI's variable annuity contracts contain a guaranteed minimum death benefit ("GMDB") (which may exceed the value of the policyholder's account) to be paid if the annuityholder dies before the annuity payout period commences.  Liabilities for any difference between the GMDB and the related account balance is borne by GAFRI and expensed when paid.  In periods of declining equity markets, the GMDB difference increases as the variable annuity account value decreases.  At September 30, 2003, the aggregate GMDB values (assuming every policyholder died on that date) exceeded the market value of the underlying variable annuities by $181 million.  Industry practice varies, but GAFRI does not establish GAAP reserves for this mortality risk.  Under SOP 03-1, GAFRI would be required to record a liability for the present value of expected GMDB payments.  Initial recognition of a GAAP liability is estimated to be less than $5 million at September 30, 2003.  Death benefits paid in excess of the variable annuity account balances were about $1.1 million in both the first nine months of 2003 and in all of 2002.

The impact of SOP 03-1 on accounting for GAFRI's fixed annuities has not yet been determined.

ITEM 3



Quantitative and Qualitative Disclosure of Market Risk

Fixed Maturity Portfolio

As of September 30, 2003, there were no other material changes to the information provided in AFC's Form 10-K for 2002 under the caption "Exposure to Market Risk" in Management's Discussion and Analysis of Financial Condition and Results of Operations.



ITEM 4

Controls and Procedures

AFC's Chief Executive Officer and Chief Financial Officer, with assistance from management, have evaluated AFC's disclosure controls and procedures (as defined in Exchange Act Rule 13a-15) as of the end of the period covered by this report.  Based on that evaluation, they concluded that the controls and procedures are effective.  There have been no significant changes in AFC's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

28



AMERICAN FINANCIAL CORPORATION 10-Q



PART II

OTHER INFORMATION



ITEM 1



Legal Proceedings

Please refer to Item 3 "Legal Proceedings" of the AFC 2002 Form 10-K.  In February 2003, Great American Insurance Company entered into an agreement for the settlement of litigation brought by certain parties referred to as A.P. Green.  During the third quarter of 2003, a revised settlement agreement was approved by the Bankruptcy Court supervising the A.P. Green reorganization shortly after its execution.  The revised settlement agreement is conditioned upon confirmation of a plan of reorganization that includes an injunction prohibiting the assertion against Great American of any present or future asbestos personal injury claims under policies issued to A.P. Green and related companies.  No assurance can be made that all conditions will be met; no payments are required until completion of the process.  If the conditions are not met, the outcome of this litigation will again be subject to the complexities and uncertainties associated with a Chapter 11 proceeding and asbestos coverage litigation.

In October 2003, Republic Insurance Company of America, a wholly-owned subsidiary of AFC, entered into an agreement for the settlement of litigation brought in late 1994 by several medical groups.  The lawsuit (NPI Medical Group, a California professional corporation, et al., v. State Compensation Insurance Fund, et al., Superior Court of California, County of Los Angeles) alleged antitrust violations by a number of California workers' compensation insurers, including Republic.  While Republic believed it had significant defenses to these antitrust claims, in light of the risks resulting from certain recent adverse pretrial rulings, it was concluded that a settlement was in the company's best interest.  The settlement is for $37.5 million, a portion of which will be covered by reserves established through September 30, 2003.  As of September 30, 2003, Republic recorded a $35.5 million charge to cover the balance of the settlement and remaining legal costs.





ITEM 6



Exhibits and Reports on Form 8-K



(a) Exhibit 12    - Computation of ratios of earnings to fixed charges.

Exhibit 31(a) - Certification of the Chief Executive Officer pursuant to
                    section 302(a) of the Sarbanes-Oxley Act of 2002.

Exhibit 31(b) - Certification of the Chief Financial Officer pursuant to
                    section 302(a) of the Sarbanes-Oxley Act of 2002.

Exhibit 32    - Certification of the Chief Executive Officer and Chief
                    Financial Officer pursuant to section 906 of the Sarbanes-
                    Oxley Act of 2002.

(b) Reports on Form 8-K:



|Date of Report  | Item Reported                                    
|--------------- | -------------------------------------------------
|                |                                                  
|July 7, 2003    | Press Release regarding AFC/AFG Merger Agreement.
|                |                                                  
|October 7, 2003 | Press Release regarding AFC/AFG Merger Agreement.
|                |                                                  

29



AMERICAN FINANCIAL CORPORATION 10-Q



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     
|----------------- | -----------------------------------
|                  |                                    
|                  |                                    
|                  |                                    
|                  |                                    
|November 10, 2003 | BY: s/Fred J. Runk                 
|                  | Fred J. Runk                       
|                  | Senior Vice President and Treasurer

30