SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549


                             FORM 10-Q


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


For the Quarterly Period Ended                      Commission File
September 30, 1997                                  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 November 1, 1997, there were 45,000,000 shares of the
Registrant's Common Stock outstanding, all of which were owned by
American Financial Group, Inc.




                           Page 1 of 18
<PAGE>
                AMERICAN FINANCIAL CORPORATION 10-Q
                              PART I
                       FINANCIAL INFORMATION

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


                                               September 30,   December 31,
                                                       1997           1996
           Assets
Cash and short-term investments                 $   352,261    $   404,831
Investments:
  Bonds and redeemable preferred stocks:
    Held to maturity - at amortized cost
      (market - $3,318,500 and $3,528,100)        3,250,282      3,491,126
    Available for sale - at market
      (amortized cost - $7,051,321 and 
         $6,362,597)                              7,307,421      6,494,597
  Other stocks - principally at market
    (cost - $110,812 and $142,364)                  401,112        327,664
  Investment in investee corporations               219,044        199,651
  Loans receivable                                  541,694        568,055
  Real estate and other investments                 213,769        205,021
     Total investments                           11,933,322     11,286,114

Recoverables from reinsurers and prepaid
  reinsurance premiums                            1,001,615        942,450
Agents' balances and premiums receivable            709,882        609,403
Deferred acquisition costs                          481,859        452,041
Other receivables                                   259,976        272,766
Deferred tax asset                                   12,384        137,284
Assets held in separate accounts                    280,461        247,579
Prepaid expenses, deferred charges 
  and other assets                                  368,488        368,114
Cost in excess of net assets acquired               269,850        278,581

                                                $15,670,098    $14,999,163

<PAGE>
     Liabilities and Capital
Unpaid losses and loss adjustment expenses      $ 4,199,056    $ 4,123,701
Unearned premiums                                 1,336,031      1,247,806
Annuity benefits accumulated                      5,505,794      5,365,612
Life, accident and health reserves                  600,105        575,380
Payable to American Financial Group, Inc.           334,388        422,015
Other long-term debt:
  Holding companies                                 243,719        339,504
  Subsidiaries                                      147,134        178,415
Liabilities related to separate accounts            280,461        247,579
Accounts payable, accrued expenses and other
  liabilities                                       973,563        915,398
     Total liabilities                           13,620,251     13,415,410

Minority interest                                   494,744        306,858

Shareholders' Equity:
  Preferred Stock (liquidation value $258,638)      162,760        162,760
  Common Stock without par value (45,000,000
    shares outstanding)                               9,625          9,625
  Capital surplus                                   931,892        919,746
  Retained earnings                                 139,226          1,364
  Net unrealized gain on marketable securities,
    net of deferred income taxes                    311,600        183,400
     Total shareholders' equity                   1,555,103      1,276,895

                                                $15,670,098    $14,999,163
                                2
<PAGE>
                 AMERICAN FINANCIAL CORPORATION 10-Q

           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENT OF EARNINGS
                            (In Thousands)
<TABLE>
<CAPTION>

                                             Three months ended           Nine months ended
                                                September 30,                September 30,
                                                 1997         1996           1997         1996
<S>                                       <C>          <C>             <C>          <C>
Income:
  Property and casualty insurance
    premiums                               $  739,858   $  718,826      $2,102,001   $2,162,634
  Life, accident and health premiums           32,149       24,809          84,845       80,323
  Investment income                           218,626      212,571         645,961      627,128
  Realized gains on sales of securities        29,682        3,161          35,693       24,604
  Equity in net earnings (losses) of
    investee corporations                     (13,914)      (3,361)         18,094       22,505
  Gain on sale of investee corporation           -         169,376            -         169,376
  Gains on sales of subsidiaries                 -            -                731       36,837
  Other income                                 28,335       38,072          80,582      103,007
                                            1,034,736    1,163,454       2,967,907    3,226,414

Costs and Expenses:
  Property and casualty insurance:
    Losses and loss adjustment expenses       545,915      616,294       1,510,426    1,655,634
    Commissions and other underwriting                   
      expenses                                208,975      187,486         586,580      596,505
  Annuity benefits                             72,868       69,514         212,305      206,319
  Life, accident and health benefits           28,250       21,742          78,238       70,212
  Interest charges on borrowed money           21,167       20,180          67,293       68,528
  Minority interest expense                    10,530       18,670          30,887       39,348
  Other operating and general expenses         89,775       81,587         233,214      240,628
                                              977,480    1,015,473       2,718,943    2,877,174

Earnings before income taxes and
  extraordinary items                          57,256      147,981         248,964      349,240
Provision for income taxes                     22,339       28,799          91,343       92,967

Earnings before extraordinary items            34,917      119,182         157,621      256,273

Extraordinary items - loss on prepayment
  of debt                                      (6,908)      (8,286)         (6,986)     (25,644)

Net Earnings                               $   28,009   $  110,896       $ 150,635   $  230,629
</TABLE>
                                3
<PAGE>
                AMERICAN FINANCIAL CORPORATION 10-Q

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

                                                         Nine months ended
                                                           September 30,
                                                          1997        1996
Operating Activities:
  Net earnings                                      $  150,635   $  230,629
  Adjustments:
   Extraordinary items                                   6,986       25,644
   Depreciation and amortization                        51,173       50,724
   Annuity benefits                                    212,144      206,319
   Equity in net earnings of investee corporations     (18,094)     (22,505)
   Changes in reserves on assets                          (102)      11,866
   Realized gains on investing activities              (36,102)    (230,142)
   Increase (decrease) in reinsurance and other
     receivables                                      (216,226)      48,171
   Decrease in other assets                             66,962       29,799
   Increase in insurance claims and reserves           188,305       62,453
   Decrease in other liabilities                      (104,382)    (133,124)
   Increase in minority interest                        24,944       34,857
   Dividends from investees                              3,600        3,600
   Other, net                                          (19,044)      (7,169)
                                                       310,799      311,122
Investing Activities:
  Purchases of and additional investments in:
    Fixed maturity investments                      (1,816,550)  (1,522,126)
    Equity securities                                  (22,783)      (9,270)
    Investees and subsidiaries                          (4,900)        -
    Real estate, property and equipment                (35,396)     (25,629)
  Maturities and redemptions of fixed maturity
    investments                                        535,178      444,986
  Sales of:
    Fixed maturity investments                         935,942      587,677
    Equity securities                                   85,677       32,687
    Investees and subsidiaries                           2,500      286,648
    Real estate, property and equipment                  2,792        7,438
  Cash and short-term investments of former
    subsidiaries                                           (70)      (4,589)
  Increase in other investments                         (4,448)      (9,183)
                                                      (322,058)    (211,361)
<PAGE>
Financing Activities:
  Annuity receipts                                     369,731      410,203
  Annuity payments                                    (439,818)    (372,005)
  Additional long-term borrowings                       63,090      278,275
  Reductions of long-term debt                        (110,494)    (515,253)
  Borrowings from AFG                                   44,100      106,972
  Payments to AFG                                     (118,500)     (55,000)
  Capital contribution                                  14,000       14,000
  Issuances of trust preferred securities              149,353         -
  Cash dividends paid                                  (12,773)     (12,753)
                                                       (41,311)    (145,561)

Net Decrease in Cash and Short-term Investments        (52,570)     (45,800)

Cash and short-term investments at beginning
  of period                                            404,831      448,201

Cash and short-term investments at end of period    $  352,261   $  402,401

                                4
<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.
   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.

   At the close of business on December 31, 1996, American
   Financial Group ("AFG") contributed to AFC 81% of the common
   stock of American Premier.  Since AFC and American Premier are
   under the common control of AFG, the acquisition of American
   Premier has been recorded by AFC at AFG's historical cost in a
   manner similar to a pooling of interests.  Accordingly, the
   historical consolidated financial statements of AFC for periods
   subsequent to April 3, 1995 (date of common control) have been
   restated to include the accounts of American Premier.

   AFC's ownership of subsidiaries and significant affiliates with
   publicly traded common shares was as follows:
                                             September 30,   December 31,
                                                     1997    1996   1995
    American Annuity Group, Inc. ("AAG")              81%     81%    81%
    American Financial Enterprises, Inc. ("AFEI")     81%     83%    83%
    Chiquita Brands International, Inc.               40%     43%    44%
    Citicasters Inc.                                  (a)     (a)    38%

    (a) Sold in September 1996.

<PAGE>
   Investments  Debt securities are classified as "held to
   maturity" and reported at amortized cost if AFC has the positive
   intent and ability to hold them to maturity.  Debt and equity
   securities are classified as "available for sale" and reported
   at fair value with unrealized gains and losses reported as a
   separate component of shareholders' equity if the securities are
   not classified as held to maturity or bought and held
   principally for selling in the near term.  Only in certain
   limited circumstances, such as significant issuer credit
   deterioration or if required by insurance or other regulators,
   may a company change its intent to hold a certain security to
   maturity without calling into question its intent to hold other
   debt securities to maturity in the future.
                                5
<PAGE>
                AMERICAN FINANCIAL CORPORATION 10-Q

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


   Premiums and discounts on mortgage-backed securities are
   amortized over their expected average lives using the interest
   method.  Gains or losses on sales of securities are recognized
   at the time of disposition with the amount of gain or loss
   determined on the specific identification basis.  When a decline
   in the value of a specific investment is considered to be other
   than temporary, a provision for impairment is charged to
   earnings and the carrying value of that investment is reduced.

   Short-term investments are carried at cost; loans receivable are
   stated primarily at the aggregate unpaid balance.

   Investment in Investee Corporations  Investments in securities
   of 20%- to 50%-owned companies are carried at cost, adjusted for
   AFC's proportionate share of their undistributed earnings or
   losses.  Investments in less than 20%-owned companies are
   accounted for by the equity method when, in the opinion of
   management, AFC can exercise significant influence over
   operating and financial policies of the investee.

   Cost in Excess of Net Assets Acquired  The excess of cost of
   subsidiaries and investees over AFC's equity in the underlying
   net assets ("goodwill") is being amortized over 40 years.  The
   excess of AFC's equity in the net assets of other subsidiaries
   and investees over its cost of acquiring these companies
   ("negative goodwill") is allocated to AFC's basis in these
   companies' fixed assets, goodwill and other long-term assets and
   is amortized on a 10- to 40-year basis.

   Insurance  As discussed under "Reinsurance" below, unpaid losses
   and loss adjustment expenses and unearned premiums have not been
   reduced for reinsurance recoverable.
   
   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 the 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 reinsurance
   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 reinsurers.

<PAGE>
   Deferred Acquisition Costs  Policy acquisition costs
   (principally commissions, premium taxes and other underwriting
   expenses) related to the production of new business are deferred
   ("DPAC").  For the property and casualty companies, the deferral
   of acquisition costs is limited based upon their recoverability
   without any consideration for anticipated investment income.
   DPAC is charged against income ratably over the terms of the
   related policies.  For the annuity companies, DPAC is amortized,
   with interest, in relation to the present value of expected
   gross profits on the policies.

   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 the direct business written; (b) estimates
   received from ceding reinsurers and insurance pools
   and associations; (c) estimates of unreported losses based on
   past
                                6
<PAGE>
                AMERICAN FINANCIAL CORPORATION 10-Q
                                 
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


   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.  In spite of the variability inherent in such
   estimates, management believes that the liabilities for unpaid
   losses and loss adjustment expenses are adequate.  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.
   
   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 ordinary life, accident and
   health policies are computed using a net level premium method.
   Computations are based on anticipated investment yields,
   mortality, morbidity and surrenders and include provisions for
   unfavorable deviations.  Reserves are modified as necessary to
   reflect actual experience and developing trends.
   
   Assets Held In and Liabilities Related to Separate Accounts
   Investment annuity deposits and related liabilities represent
   primarily deposits maintained by several banks under a
   previously offered tax-deferred annuity program.  AAG receives
   an annual fee from each bank for sponsoring the program; if
   depositors elect to purchase an annuity from AAG, funds are
   transferred to AAG.
   
   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.
<PAGE>
   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.  The estimate is accrued during the period
   in which the related premium is 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.
   
   Income Taxes  AFC and American Premier have each filed
   consolidated federal income tax returns which include all 80%-
   owned U.S. subsidiaries, except for certain life insurance
   subsidiaries and their subsidiaries.   At the close of business
   on December 31, 1996, AFG contributed 81% of the common stock of
   American Premier to AFC.  Accordingly, AFC and American Premier
   will file a single consolidated return for 1997.  Because
   holders of AFC Preferred Stock hold in excess of 20% of AFC's
   voting rights, AFG (parent) owns less than 80% of AFC, and
   therefore, will file a separate return.
                                7
<PAGE>
                AMERICAN FINANCIAL CORPORATION 10-Q

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


   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.

   Benefit Plans  AFC provides retirement benefits to qualified
   employees of participating companies through contributory and
   noncontributory defined contribution plans.  Contributions to
   benefit plans are charged against earnings in the year for which
   they are declared.  Both AFC and American Premier had
   contributory employee savings plans and noncontributory Employee
   Stock Ownership Retirement Plans ("ESORP").  Under one of the
   savings plans, American Premier matched a specific portion of
   employee contributions.  Under the ESORP plans, contributions
   were invested in securities of AFG and affiliates for the
   benefit of their employees.  In 1997, these ESORP plans were
   combined into a new plan.

   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 the
   employees qualify for such benefits.
   
   Minority Interest  For balance sheet purposes, minority interest
   represents the interests of noncontrolling shareholders in AFC
   subsidiaries including preferred securities issued by trust
   subsidiaries of AAG and AFG's direct ownership interest in
   American Premier.  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.
   
   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.
                                8
<PAGE>
                AMERICAN FINANCIAL CORPORATION 10-Q

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


B. Segments of Operations  AFC operates its property and casualty
   insurance business in three major segments:  nonstandard
   automobile, specialty lines, and commercial and personal lines.
   AFC's annuity and life business primarily sells tax-deferred
   annuities to employees of primary and secondary educational
   institutions and hospitals.  In addition, AFC has owned
   significant portions of the voting equity securities of certain
   companies (investee corporations - see Note C).  The following
   table (in thousands) shows AFC's revenues by significant
   business segment.

                                     Nine months ended September 30,
      Revenues                                    1997         1996
      Property and casualty insurance:           
       Premiums earned:
         Nonstandard automobile             $  898,390   $  900,989
         Specialty lines                       778,447      742,075
         Commercial and personal lines         425,140      519,112
         Other lines                                24          458
                                             2,102,001    2,162,634
       Investment and other income             340,608      423,294
                                             2,442,609    2,585,928
      Annuities and life (*)                   466,046      437,763
      Other                                     41,158      180,218
                                             2,949,813    3,203,909
      Equity in net earnings of investee
        corporations                            18,094       22,505

                                            $2,967,907   $3,226,414

      (*) Represents primarily investment income.

C. Investment in Investee Corporations  Investment in investee
   corporations reflects primarily AFC's 40% ownership (24 million
   shares; carrying value of $214.1 million at September 30, 1997)
   of Chiquita common stock.  The market value of AFC's investment
   in Chiquita was $387 million and $306 million at
   September 30, 1997 and December 31, 1996, respectively.
   Chiquita is a leading international marketer, producer and
   distributor of bananas and other quality fresh and processed
   food products.
   
   Summarized financial information for Chiquita follows (in
   millions):

                                         Nine months ended September 30,
                                                     1997          1996
     Net Sales                                     $1,834        $1,880
     Operating Income                                 134           149
     Income before Extraordinary Item                  56            60
     Extraordinary Loss from Debt Refinancings        -             (23)
     Net Income                                        56            37
<PAGE>
   In September 1997, AFC sold its investment in Citicasters to
   Jacor Communications for approximately $220 million in cash
   plus warrants to purchase Jacor common stock.  AFC realized a
   pretax gain of approximately $169 million, before minority
   interest of $6.5 million, on the sale.
                                9
<PAGE>
                AMERICAN FINANCIAL CORPORATION 10-Q

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


D. Payable to American Financial Group, Inc.  At September 30,
   1997, AFC had outstanding borrowings under a note with AFG
   (bearing interest at 11-5/8%) of $213 million, plus accrued
   interest of $6.2 million.  American Premier has a credit
   agreement with AFG under which American Premier and AFG may
   make loans of up to $250 million available to each other.  The
   balance outstanding under the credit line bears interest at a
   variable rate of one percent over LIBOR and is payable on
   December 31, 2010.  At September 30, 1997, American Premier had
   outstanding borrowings under the credit agreement of
   $113.1 million, plus accrued interest of $2.0 million.

E. Other Long-Term Debt  The carrying value of other long-term
   debt consisted of the following (in thousands):

                                                   September 30,  December 31,
                                                           1997          1996
     Holding Companies:
       9-3/4% AFC Debentures due April 2004            $ 80,446      $164,368
       9-3/4% APU Subordinated Notes due August 1999     92,299        93,604
       10-5/8% APU Subordinated Notes due April 2000     44,676        54,595
       10-7/8% APU Subordinated Notes due May 2011       18,158        18,496
       Other                                              8,140         8,441
                                                       $243,719      $339,504

     Subsidiaries:
       AAG notes payable under bank lines due
         September 1998 and 1999                       $ 56,000      $ 44,700
       9-1/2% AAG Senior Notes due August 2001             -           40,845
       11-1/8% AAG Senior Subordinated Notes
         due February 2003                               24,080        24,080
       Notes payable secured by real estate              52,120        52,543
       Other                                             14,934        16,247
                                                       $147,134      $178,415

   In a September 1997 tender offer, AFC retired $82.8 million of
   its 9-3/4% Debentures for $90.6 million in cash.  In addition,
   during the first nine months of 1997, American Premier
   repurchased $10.1 million of its Notes for $11.1 million in
   cash and AAG redeemed all of its outstanding 9-1/2% Senior
   Notes for $42.5 million in cash.
<PAGE>
   At September 30, 1997, sinking fund and other scheduled
   principal payments on debt for the balance of 1997 and the
   subsequent five years were as follows (in thousands):
   
                   Holding
                 Companies   Subsidiaries        Total
      1997         $ 5,282        $   670     $  5,952
      1998            -            18,841       18,841
      1999          90,903         42,433      133,336
      2000          42,967          8,746       51,713
      2001            -             1,453        1,453
      2002            -             1,458        1,458

   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.

                                10
<PAGE>
                AMERICAN FINANCIAL CORPORATION 10-Q
                                 
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 
                                 
F. Minority Interest  Included in minority interest are the
   preferred securities issued by trust subsidiaries of AAG.

   In November 1996, a wholly-owned subsidiary trust of AAG issued
   three million units of 9-1/4% trust originated preferred
   securities ("TOPrS") for $75 million in cash.  The Trust then
   purchased $75 million of newly issued AAG 9-1/4% Subordinated
   Debentures due 2026, which, along with related interest and
   principal payments received, are the only assets of the Trust.
   The TOPrS are mandatorily redeemable upon maturity or
   redemption of the Subordinated Debentures.  The Subordinated
   Debentures are redeemable by AAG on or after November 7, 2001.
   AAG effectively provides an unconditional guarantee of the
   Trust's obligations under the TOPrS.

   Through private transactions completed in March and May 1997,
   wholly-owned subsidiary trusts of AAG issued $75 million of 8-
   7/8% preferred securities and $75 million of 7-1/4% Remarketed
   Par Securities ("ROPES"), respectively, and used the proceeds
   to purchase the related debentures of their parent due in 2027
   and 2041.

G. Preferred Stock  Under provisions of both the Nonvoting
   (21.1 million shares authorized) and Voting (17.0 million
   shares authorized, 13.9 million shares outstanding) Cumulative
   Preferred Stock, the Board of Directors may divide the
   authorized stock into series and set specific terms and
   conditions of each series.  The outstanding shares of preferred
   stock consisted of the following (see Note L - "Subsequent
   Event"):

      Series F,  $1 par value; $20.00 liquidating value per share;
      annual dividends per share $1.80; nonredeemable; 11,900,725
      shares (stated value $145.4 million) outstanding at
      September 30, 1997 and December 31, 1996.

      Series G,  $1 par value; annual dividends per share $1.05;
      redeemable at $10.50 per share; 1,964,158 shares (stated
      value $17.4 million) outstanding at September 30, 1997 and
      December 31, 1996.
<PAGE>
H. Common Stock  At September 30, 1997, American Financial Group
   owned all of the outstanding shares of AFC's Common Stock.

I. Extraordinary Items  Extraordinary items represent AFC's
   proportionate share of gains and losses related to debt
   retirements by the following companies.  Amounts shown are net
   of minority interest and income tax benefits (in thousands):

                                  Nine months ended
                                     September 30,
                                    1997       1996
       AFC (parent)              ($5,357)  ($ 9,605)
       Subsidiaries:
        APU (parent)                (379)      (458)
        AAG                       (1,250)    (7,159)
        Other                        -           57
       Investee:
         Chiquita                    -       (8,479)
                                 ($6,986)  ($25,644)

                                11
<PAGE>
                AMERICAN FINANCIAL CORPORATION 10-Q

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


J. Cash Flows - Fixed Maturity Investments  "Investing activities"
   related to fixed maturity investments in AFC's Statement of Cash 
   Flows consisted of the following (in thousands):

                                    Held to    Available
     1997                          Maturity     For Sale         Total
     Purchases                     $  3,759   $1,812,791    $1,816,550
     Maturities and redemptions     268,432      266,746       535,178
     Sales                             -         935,942       935,942

     1996
     Purchases                     $175,629   $1,346,497    $1,522,126
     Maturities and redemptions     220,417      224,569       444,986
     Sales                            9,310      578,367       587,677

   Securities classified as "held to maturity" having an amortized
   cost of $9.5 million were sold in 1996 due to significant
   deterioration in the issuers' creditworthiness.

K. Commitments and Contingencies  There have been no significant
   changes to the matters discussed and referred to in Note N
   "Commitments and Contingencies" in AFC's Annual Report on Form
   10-K for 1996.

L. Subsequent Events

   Sale of Millennium Dynamics  On October 22, 1997, AFG announced
   that it has agreed to sell the assets of its software solutions
   and consulting services subsidiary, Millennium Dynamics, Inc.,
   to a subsidiary of Peritus Software Services, Inc.  AFC is to
   receive $30 million in cash and 2,175,000 shares of Peritus
   common stock on the sale which is expected to close in the
   fourth quarter of 1997.  AFG estimates that its basis in the
   subsidiary plus fees and expenses related to the sale will be
   approximately $15 million to $20 million.

   Merger Transactions Involving AFC and AFEI  In July 1997, AFG
   announced that it has entered into agreements with AFC and AFEI
   to reduce its corporate expenses and improve its corporate
   capital structure.
<PAGE>
   AFG has proposed a merger transaction, as amended in October 1997,
   whereby holders of AFC's Series F Preferred would receive
   consideration of the greater of $23.75 per share or a fixed spread
   price which will be measured at the time of closing.  Also, accrued
   dividends on Series F Preferred Stock will be paid from November 1,
   1997 to the closing date.  Holders of AFC's Series G Preferred would
   receive consideration of $10.50 per share plus accrued dividends.
   Consideration would be payable, at the holder's election, in shares
   of a new issue of AFC Preferred Stock, in cash, or a combination of
   the two.  It is a condition to the merger that there be
   approximately $70.4 million in liquidation value of a new Preferred
   Stock issued, representing at least 20% of AFC's total voting power.
   The new preferred would be redeemable at AFC's option after the
   eighth anniversary of its issuance, have a liquidation value of
   $25.00 per share and pay an 8% dividend of $2.00 per share per year
   on a semi-annual basis.

   AFG has also proposed that AFEI engage in a merger transaction
   whereby all publicly held shares of AFEI would be exchanged, at
   the option of AFEI shareholders, for shares of AFG common stock
   on a one-for-one basis, or $37.00 per share in cash.  There are
   approximately 2.7 million shares of AFEI common stock
   outstanding (including yet-unexercised stock options) which are
   not beneficially owned by AFG.

   These transactions are subject to the receipt of all required
   shareholder, stock exchange listing and regulatory approvals.
   Shareholder meetings for the companies involved in these
   transactions are scheduled for December 2, 1997.
                                12
<PAGE>
                AMERICAN FINANCIAL CORPORATION 10-Q

                              ITEM 2

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

GENERAL

AFC is organized as a holding company with almost all of its
operations being conducted by subsidiaries and affiliates.  The
parent corporation, however, has continuing cash needs for
administrative expenses, the payment of principal and interest on
borrowings, dividends on AFC Preferred Stock, 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.

LIQUIDITY AND CAPITAL RESOURCES

Ratios  AFC's debt to total capital ratio at the parent holding
company level was approximately 14% at September 30, 1997 and 20%
at December 31, 1996.  AFC's ratio of earnings to fixed charges on
a total enterprise basis was 3.85 for the first nine months of 1997
compared to 4.99 for the entire year of 1996; ratios of earnings to
fixed charges and preferred dividends were 2.90 and 3.96 for the
same periods.

Sources of Funds    Management believes AFC has sufficient
resources to meet its liquidity requirements through operations in
the short-term and long-term future.  If funds generated from
operations, including dividends from subsidiaries, are insufficient
to meet fixed charges in any period, these companies would be
required to generate cash through borrowings, sales of securities
or other assets, or similar transactions.

In December 1996, American Premier paid a dividend to AFG in the
form of a $675 million note receivable from AFC plus $18.7 million
of related accrued interest.  AFG then contributed $450 million of
the note (without accrued interest) to the capital of AFC.  At
September 30, 1997, $213 million is outstanding under the note and
included in payable to AFG on AFC's balance sheet.

American Premier has a credit agreement with AFG under which
American Premier and AFG will make loans of up to $250 million
available to each other.  Principal amounts payable to AFG under
the credit agreement totaled $113.1 million and $175.5 million at
September 30, 1997 and December 31, 1996, respectively.
<PAGE>
Bank credit lines at several subsidiary holding companies provide
ample liquidity and can be used to obtain funds for the operating
subsidiaries or, if necessary, for the parent company.
Agreements with the banks generally run for three to seven years
and are renewed before maturity.  While it is highly unlikely
that all such amounts would ever be borrowed at one time, a
maximum of $510 million is available under these bank facilities,
$56 million of which was borrowed at September 30, 1997.

In the past, funds have been borrowed under certain of these bank
facilities and used for working capital, capital infusions into
subsidiaries, and to retire other issues of short-term or high-rate
debt.  Also, AFC believes it may be prudent and advisable to borrow
up to $200 million of bank debt in the normal course in order to
retire public or privately held fixed rate obligations over the
next year or two.

The cash to be utilized for the proposed merger transactions
involving AFC and AFEI is expected to come from internally
generated funds and existing credit lines (see Note L).
                                13
<PAGE>                          
               AMERICAN FINANCIAL CORPORATION 10-Q

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


Dividend payments from subsidiaries have been very important to the
liquidity and cash flow of the individual holding companies in the
past.  However, the reliance on such dividend payments has been
lessened by the combination of (i) strong capital at AFC's
insurance subsidiaries (and the related decreased likelihood of a
need for investment in those companies), (ii) the reductions of
debt at the holding companies (and the related decrease in ongoing
cash needs for interest and principal payments), (iii) AFC's
ability to obtain financing in capital markets, as well as (iv) the
sales of non-insurance investments.

Investments  Approximately 93% of the bonds and redeemable
preferred stocks held by AFC were rated "investment grade" (credit
rating of AAA to BBB) by nationally recognized rating agencies at
September 30, 1997.  Investment grade securities generally bear
lower yields and lower degrees of risk than those that are unrated
and non-investment 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.

RESULTS OF OPERATIONS

General  Pretax earnings before extraordinary items for the three
months ended September 30, 1997 were $57.3 million compared to
$148 million for the third quarter of 1996.  Results for 1996
include (i) $166 million in pretax gains (net of minority interest)
primarily on the sale of Citicasters, (ii) a charge of $80 million
resulting from an increase in insurance reserves relating to
asbestos and other environmental matters ("A&E") and (iii) losses
of about $30 million form Hurricane Fran.  Excluding realized gains
and the unusual 1996 items, pretax earnings before extraordinary
items were approximately $30 million and $90 million for the third
quarter of 1997 and 1996, respectively.  This decrease is
attributable to a deterioration in underwriting profit in the
property and casualty operations due primarily to increasing claims
severity in the California workers' compensation business, several
unusually large commercial lines casualty losses, increased
investee losses, and a nonrecurring charge associated with an
arbitration settlement.

Pretax earnings before extraordinary items were $249 million for
the first nine months of 1997 compared to $349.2 million for the
first nine months of 1996.  Excluding realized gains (net of
minority interest), the A&E charge and the effect of Hurricane
Fran, pretax earnings before extraordinary items were approximately
$215 million and $240 million for the first nine months of 1997 and
1996, respectively.  This decrease was due primarily to third
quarter results which more than offset improved earnings in the
first six months of 1997.
<PAGE>
Property and Casualty Insurance - Underwriting  AFC manages and
operates its property and casualty business as three major sectors.
The nonstandard automobile insurance companies (the "NSA Group")
insure risks not typically accepted for standard automobile
coverage because of the applicant's driving record, type of
vehicle, age or other criteria.  The specialty lines are a
diversified group of over twenty-five business lines that offer a
wide variety of specialty insurance products.  Some of the more
significant areas are California workers'compensation, executive 
liability, inland and ocean marine, U.S.-based operations of Japanese 
companies, agricultural-related coverages, excess and surplus lines, 
aviation coverages and fidelity and surety bonds.  The commercial and 
personal lines provide coverages in commercial multi-peril, workers' 
compensation, umbrella and commercial automobile, standard private 
passenger automobile and homeowners insurance.
                                14
<PAGE>
                AMERICAN FINANCIAL CORPORATION 10-Q

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

Net written 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,
                                   1997        1996        1997        1996
  Net Written Premiums (GAAP)
    NSA Group                    $299.1      $277.2    $  957.0    $  868.8
    Specialty Operations          304.8       270.5       826.8       755.6
    Commercial and Personal
      Operations                  136.4       160.7       367.0       488.9
    Other Lines                      -           -           -           .3
                                 $740.3      $708.4    $2,150.8    $2,113.6

  Combined Ratios (GAAP)
    NSA Group                      97.3%       98.2%       97.2%      100.3%
    Specialty Operations          101.5        69.2        94.5        85.0
    Commercial and Personal
      Operations                  111.7       126.7       105.8       111.2
    Aggregate (including A&E                              
      and other lines)            102.0       111.8        99.8       104.2
<PAGE>
Operating results for the third quarter and first nine months of
1996 were adversely impacted by two unusual items: (i)
approximately $30 million in losses due to Hurricane Fran and (ii)
increases in A&E reserves (exposures for which AFC has been held
liable under general liability policies written years ago).  A
standard insurance measure used in analyzing the adequacy of A&E
reserves is the "survival ratio" (reserves divided by three-year
average annual paid losses).  Due in part to the greater
uncertainties inherent in estimating A&E claims, management 
evaluates its survival ratio in relation to those published for 
the industry.  Based primarily on industry survival ratios published 
in mid-1996, AFC increased A&E reserves of its discontinued insurance 
lines by $120 million by recording a third quarter, non-cash, pretax 
charge of $80 million and reallocating $40 million, or approximately 
2%, of reserves from its Specialty Operations.  Reserves for unpaid 
losses and loss adjustment expenses of the Specialty Lines were 
approximately $2.1 billion at September 30,  1997 and December 31, 1996.  
A&E reserves at September 30, 1997, were approximately $348 million, 
an amount equal to approximately 10 times the preceding three years' 
average claim payments.
                                15
<PAGE>
                AMERICAN FINANCIAL CORPORATION 10-Q

               Management's Discussion and Analysis
   of Financial Condition and Results of Operations - Continued
                                 
                                 
 NSA Group  Net written premiums for the NSA Group increased 8%
during the third quarter and 10% during the first nine months of
1997 from the comparable 1996 periods due primarily to volume
increases in California resulting from enactment of legislation
which requires drivers to provide proof of insurance in order to
obtain a valid permit.  The improvement in the combined ratio
reflects rate increases in various states over the last couple of
years.

 Specialty Operations  Net written premiums for the specialty
operations increased 13% during the third quarter and 9% during the
first nine months of 1997 from the comparable 1996 periods due
primarily to premiums recorded by a newly acquired aviation
division and the return of premiums related to the withdrawal from
a voluntary pool in 1996.  Underwriting results for the third
quarter and first nine months of 1997 declined due primarily to (i)
the reallocation of $40 million in reserves to A&E reserves (a
combined ratio impact of 15.0 points and 5.4 points for the third
quarter and first nine months of 1996, respectively), (ii) 1996
reductions in reserves for business written primarily prior to 1995
in response to fundamental changes in the California workers'
compensation market and actuarial evaluations, and (iii) increased
losses during the third quarter of 1997 relating to deteriorating
underwriting margins in California workers' compensation business
written in 1996 and 1997.

 Commercial and Personal Operations  Net written premiums for the
commercial and personal operations decreased 15% during the third
quarter and 25% during the first nine months of 1997 from the
comparable 1996 periods due primarily to a reinsurance agreement,
effective January 1, 1997, under which 80% of all AFG's homeowners'
business will be reinsured, and reduced writings of personal
automobile coverages in certain states.  Excluding the impact of
the reinsurance agreement, premiums decreased 6% and 9%,
respectively.  Underwriting results for 1997 were impacted by
several current year commercial casualty losses as well as adverse
development in certain prior year claims.  Underwriting results for
1996 included losses attributable to Hurricane Fran and other
weather-related losses.

Investment Income  Investment income increased approximately 3% in
the third quarter and the first nine months of 1997 compared to
1996 due primarily to an increase in the average amount of
investments held.

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.
<PAGE>
Investee Corporations  Equity in net earnings of investee
corporations in 1997 represents AFC's proportionate share of
Chiquita's earnings.  Chiquita reported net earnings (losses)
before extraordinary item for the third quarter and first nine
months of 1997 of ($28 million) and $56.4 million, respectively,
and ($7.6 million) and $59.7 million for the comparable 1996
periods.  Chiquita's results for 1997 have been adversely affected 
by (i) a stronger dollar, mitigated in part by the company's foreign 
currency hedging program and (ii) increased banana production costs 
arising from weather-related effects on current productivity.  Chiquita's
results for 1996 include first quarter writedowns and costs of
$12 million resulting from flood damage in Costa Rica.  Included in
earnings from investees in 1996 were earnings of $1.5 million
attributable to AFC's investment in Citicasters which was sold in
September 1996.

Gain on Sale of Investee Corporation  The gain on sale of investee
corporation for the third quarter and first nine months of 1996
represent pretax gains, before minority interest, on the sale of
Citicasters common stock.
                                16
<PAGE>
                AMERICAN FINANCIAL CORPORATION 10-Q
                                 
               Management's Discussion and Analysis
   of Financial Condition and Results of Operations - Continued
                                 
                                 
Gains on Sales of Subsidiaries  The gain on sale of subsidiaries in
1997 represents a pretax gain on the sale of a travel agency.  The
gains on sales of subsidiaries in 1996 include a pretax gain of
$33.9 million on the sale of Buckeye Management Company and the
settlement of litigation related to a subsidiary sold in 1993.

Other Income  Other income decreased $9.7 million (26%) during the
third quarter and $22.4 million (22%) during the first nine months
of 1997 due primarily to the sale of a subsidiary in the first
quarter of 1997.

Annuity Benefits  Annuity benefits reflect interest credited to
annuity policyholders' funds accumulated.  The majority of AAG's
fixed rate annuity products permit AAG 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 without a substantial effect on persistency.  Annuity
benefits increased 5% in the third quarter and 3% in the first nine
months of 1997 due primarily to an increase in average annuity
benefits accumulated.

Minority Interest Expense  Minority interest expense decreased
$8.1 million (44%) during the third quarter and $8.5 million (22%)
during the first nine months of 1997 due primarily to lower earnings
reported by American Premier in 1997 and the absence of the $6.5 million
in minority interest recorded from the sale of Citicasters common
stock in the third quarter of 1996.  These items were partially offset 
by increases in the charge for distribution requirements on trust 
preferred securities.

Other Operating and General Expenses  Other operating and general
expenses increased $8.2 million (10%) during the third quarter of 1997 
compared to 1996.  Decreases in other operating and general expenses 
resulting from the sale of a subsidiary in 1997 were more than offset by
additional expenses recorded including a nonrecurring charge of
$5.5 million relating to an arbitration settlement and a $4 million
charge related to the estimated costs of relocating operations of a
subsidiary to Cincinnati.  Other operating and general expenses
decreased $7.4 million (3%) during the first nine months of 1997.

New Accounting Standards to be Implemented  During 1997, the
Financial Accounting Standards Board issued the following Statement
of Financial Accounting Standards ("SFAS"); the implementation of
these standards will not have a significant effect on AFC's
financial position or results of operations.

  SFAS #      Subject of Standard      Period to be Implemented
   129        Capital Structure             4th quarter of 1997
   130        Comprehensive Income          1st quarter of 1998
   131        Segment Information           4th quarter of 1998

    __________________________________________________________

                                17
<PAGE>
                AMERICAN FINANCIAL CORPORATION 10-Q
                              PART II
                         OTHER INFORMATION


                              Item 6
                                 
                 Exhibits and Reports on Form 8-K


(a)   Exhibit 27 - Financial Data Schedule - Included in Report filed
                   electronically with the Securities and Exchange Commission.

(b)   Reports on Form 8-K:

           Date of Report    Item Reported
           July 14, 1997     Proposal to pay cash or issue new Preferred Stock 
                             in exchange for Series F and G Preferred Stock.




  ____________________________________________________________




                             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 13, 1997               BY:Fred J. Runk
                                   Fred J. Runk
                                   Senior Vice President and Treasurer



                                18