SECURITIES AND EXCHANGE COMMISSION

                       Washington, D. C.  20549

                       ________________________

                               Form 10-Q



   [X]      Quarterly Report Pursuant to Section 13 or 15(d)
               of the Securities Exchange Act of 1934
           For the Quarterly Period Ended March 31, 1997
                                  or
   [ ]      Transition Report Pursuant to Section 13 or 15(d)
               of the Securities Exchange Act of 1934


                        ______________________


                     Commission File Number 0-8636


               AMERICAN INDEMNITY FINANCIAL CORPORATION
               ________________________________________
        (Exact name of registrant as specified in its charter)

                Delaware                       510119643
                ________                      ___________
     (State or other jurisdiction of     (I. R. S. Employer
       incorporation or organization)     Identification No.)


One American Indemnity Plaza, Galveston, Texas         77550
______________________________________________         _____
    (Address of principal executive offices)        (Zip Code)


  Registrant's telephone number, including area code - (409) 766-4600

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  (or  for  such
shorter period that the registrant was required to file such reports),
and  (2) has been subject to such filing requirements for the past  90
days.  Yes  X  No
           ___    ____
 
As  of  May  6,  1996, 1,962,410 shares of registrant's common  stock,
$3.33 1/3 par value, were outstanding.

<PAGE>                                           PAGE 1 OF 11 PAGES


               AMERICAN INDEMNITY FINANCIAL CORPORATION
                           AND SUBSIDIARIES
Item 1.  Financial Statements
             Consolidated Statements of Operations for the
              Three Months Ended March 31, 1997 and 1996
                               Unaudited

                                                 1997           1996
                                                 ____           ____
PREMIUMS AND OTHER INCOME:
  Premiums earned                            $15,944,356    $16,875,476
  Net investment income (net of investment                           
    expenses of $103,182 in 1997 and $99,517
    in 1996)			                        	       1,065,821      1,119,619
  Realized investment gains                       23,604        136,914
  Interest on premium bills receivable and
    other income                                 213,800        172,294
                                             ____________   ____________
            TOTAL                             17,247,581     18,304,303
                                             ____________   ____________
EXPENSES:
  Losses and loss adjustment expenses         11,564,523     10,910,359
  Policy acquisition costs                     6,134,290      6,348,374
  Retrospective premium adjustments on
    workers' compensation policies              (126,399)       (20,229)
                                             ____________   ____________
            TOTAL                             17,572,414     17,238,504
                                             ____________   ____________

INCOME (LOSS) BEFORE FEDERAL INCOME TAX         (324,833)     1,065,799

PROVISION (CREDIT) FOR FEDERAL INCOME TAX:
  Current
  Deferred                                       (66,000)
                                             ____________   ____________
            TOTAL                                (66,000)
                                             ____________   ____________

NET INCOME (LOSS)                            $  (258,833)   $ 1,065,799
                                             ============   ============
AVERAGE SHARES OUTSTANDING                     1,959,785      1,947,110

EARNINGS PER SHARE:
  NET INCOME (LOSS)                          $       (.13)  $       .55
                                             ============   ============
DIVIDENDS DECLARED PER SHARE                 $       .075   $      .075
                                             ============   ============


            See Notes to Consolidated Financial Information

<PAGE>                                           PAGE 1 OF 11 PAGES



               AMERICAN INDEMNITY FINANCIAL CORPORATION
                           AND SUBSIDIARIES

                      Consolidated Balance Sheets
                 March 31, 1997 and December 31, 1996
                              (Unaudited)

ASSETS                                           1997           1996
                                                 ____           ____
Investments:
 Fixed maturities - bonds:
   Available for sale                        $ 68,758,012   $ 72,110,261
 Preferred stocks                               1,064,125      1,377,438
 Common stocks                                 12,782,234     12,420,256
 Mortgage loans on real estate                     18,409         19,710
                                             _____________  _____________
        Total Investments                      82,622,780     85,927,665
Cash and Cash Equivalents                       5,478,647      4,349,953
Accrued Investment Income                         767,808        826,791
Premiums in Course of Collection                6,279,821      4,093,476
Direct Premium Bills Receivable                10,136,171      9,659,722
Reinsurance Balances Receivable                20,913,252     18,689,412
Prepaid Reinsurance Premiums                      593,841        651,050
Property and Equipment - Less accumulated
  depreciation of $5,122,742 in 1997 and                                
  $5,014,244 in 1996                            4,080,188      4,072,394
Deferred Policy Acquisition Costs               9,493,530      9,375,133
Deferred income taxes                           4,809,000      4,743,000
Other Assets                                    2,795,550      2,511,152
                                             _____________  _____________
        TOTAL                                $147,970,588   $144,899,748


LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________
Losses and Loss Adjustment Expenses          $ 58,202,315   $ 55,601,929
Unearned Premiums                              36,732,136     36,325,073
Reinsurance Balances Held or Payable            2,428,373      1,657,874
Notes Payable to Bank                             495,781        515,981
Accounts Payable and Other Accrued Liabilities  9,659,104      9,179,918
                                             _____________  _____________
        Total Liabilities                     107,517,709    103,280,775
                                             _____________  _____________
Stockholders' Equity:
 Preferred stock, authorized 2,000,000
    shares; none outstanding
 Common stock, $3.33 1/3 par value;                         
    authorized 2,500,000 shares;
    outstanding shares 1,962,410
    in 1997 and 1,951,910 in 1996               6,541,351      6,506,351
 Paid-in surplus                               13,097,668     13,061,709
 Unrealized appreciation in market value                    
    of investments                              1,249,349      2,080,388
 Retained earnings                             19,564,511     19,970,525
                                             _____________  _____________
        Total Stockholders' Equity             40,452,879     41,618,973
                                             _____________  _____________
        TOTAL                                $147,970,588   $144,899,748
                                             =============  =============

            See Notes to Consolidated Financial Information

<PAGE>                                           PAGE 3 OF 11 PAGES

               AMERICAN INDEMNITY FINANCIAL CORPORATION
                           AND SUBSIDIARIES

             Consolidated Statements of Cash Flows for the
              Three Months Ended March 31, 1997 and 1996

                               Unaudited

OPERATING ACTIVITIES:                             1997           1996
                                                  ____           ____
 Net income (loss)                           $  (258,833)   $  1,065,799
 Adjustments to reconcile net income to
   net cash flow from operating activities:
   Decrease (Increase) in:
     Premiums in course of collection         (2,186,345)     (2,234,203)
     Direct premium bills receivable            (476,449)       (863,682)
     Reinsurance balances receivable          (2,223,840)       (320,935)
     Prepaid reinsurance premiums                 57,209          20,831
     Deferred policy acquisition costs          (118,397)       (347,766)
     Deferred income taxes                       (66,000)
     Other assets                               (284,398)        (38,471)
   Increase (Decrease) in:
     Unpaid losses and loss adjustment         2,600,386        (536,557)
       expenses
     Unearned premiums                           407,063       1,222,857
     Reinsurance balances held or payable        770,499         393,951
     Accounts payable and other accrued
       liabilities                               479,186          86,183
   Realized investment (gains) losses            (23,604)       (136,914)
   Depreciation                                  112,869         111,625
   Other                                          74,961         (81,593)
                                            _____________   _____________
     Net cash flow from operating activities  (1,135,693)     (1,658,875)
                                            _____________   _____________
INVESTING ACTIVITIES:
 Sale of bonds                                 2,712,403       3,921,664
 Maturity of bonds                               455,697       3,707,849
 Sale of preferred stocks                                         53,125
 Redemption of preferred stocks                  303,617         102,930
 Sale of common stocks                            73,869         751,442
 Purchase of bonds                              (173,015)     (8,442,168)
 Purchase of common stocks                      (892,400)       (330,095)
 Purchase of property and equipment             (120,663)       (171,894)
 Other                                             1,301           1,178
                                            _____________   _____________
     Net cash flow from investing activities   2,360,809        (405,969)
                                            _____________   _____________
FINANCING ACTIVITIES:

 Proceeds received from bank loan                                580,500
 Payments on bank loan                           (20,200)         (6,496)
 Cash dividends paid to stockholders            (147,181)       (146,034)
 Proceeds received from exercise of stock
 options                                          70,959
                                            _____________   _____________
     Net cash flow from financing activities     (96,422)        427,970
                                            _____________   _____________
     Net Increase (Decrease) in Cash and Cash  
          Equivalents                          1,128,694      (1,636,874)
     Cash and Cash Equivalents, January 1      4,349,953       4,781,566
                                            _____________   _____________
     Cash and Cash Equivalents, March 31     $ 5,478,647    $  3,144,692
                                            =============   =============
            See Notes to Consolidated Financial Information

<PAGE>                                           PAGE 4 OF 11 PAGES



               AMERICAN INDEMNITY FINANCIAL CORPORATION
                           AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL INFORMATION


(1)The  financial information included herein is unaudited but, in the
   opinion  of  management,  all  adjustments  (consisting  of  normal
   recurring  accruals)  necessary for a fair presentation  have  been
   included.   These interim consolidated financial statements  should
   be  read in conjunction with the Company's report on Form 10-K  for
   the  year  ended December 31, 1996.  The results of operations  for
   this  interim period are not necessarily indicative of results  for
   the full year.

(2)Deferred  income taxes reflect the net tax effects of (a) temporary
   differences  between the carrying amounts of assets and liabilities
   for  financial reporting purposes and the amounts used  for  income
   tax  purposes,  and  (b)  operating loss  carryforwards.   The  tax
   effects  of significant items comprising the Company's net deferred
   income  taxes  as of March 31, 1997 and December 31,  1996  are  as
   follows:

                                   March 31, 1997    December 31, 1996
                                   ______________    _________________    
 Deferred tax liabilities:
   Deferred  policy acquisition
     costs                          $ (3,227,800)       $ (3,187,545)
   Differences between book and tax
     basis of property                  (263,018)           (320,161)
   Unrealized investment gains          (424,779)           (707,332)
   Other                                (466,139)           (341,959)
                                    _____________      ______________
                                      (4,381,736)         (4,556,997)
                                    _____________      ______________
   Deferred tax assets:
   Reserves not currently deductible   5,361,731           5,167,237
   Operating loss carryforwards       12,540,556          12,189,198
                                    _____________      ______________
                                      17,902,287          17,356,435
                                    _____________      ______________
   Net Asset                          13,520,551          12,799,438
   Valuation allowance                (8,711,551)         (8,056,438)
                                    _____________      ______________
   Net deferred tax assets          $  4,809,000        $  4,743,000
                                    =============      ==============

   The  credit  for  income tax for the three months ended  March  31,
   1997  was  $66,000.   The Company did not pay  any  federal  income
   taxes  during  the first three months of 1997 or  the  first  three
   months of 1996.

   The  Company has a net operating loss carryforward for tax purposes
   of  $36,883,988, which expires if not previously utilized, in 1998-
   $3,163,998;   1999-$7,384,546;   2000-$5,712,421;  2001-$4,927,522;
   2002-$2,271,256; 2003-$621,205;  2004-$4,596,950;  2005-$1,246,728;
   2006-$118,137;  2007-$43,352;  2008-$13,450;  2009-$13,410;   2010-
   $4,604,277; 2011 - $1,133,330; and 2012 - $1,033,406.

<PAGE>                                           PAGE 5 OF 11 PAGES

(3)The  Company paid total interest expense of $11,141 and $8,136  for
   the  three  months  ended  March  31,  1997  and  March  31,  1996,
   respectively.

(4)In  February 1997, the Financial Accounting Standards Board  issued
   Statement  No. 128, "Earnings Per Share," ("SFAS No.  128").   SFAS
   No.  128, which is effective for periods ending after December  15,
   1997,  establishes standards for computing and presenting  earnings
   per  share  ("EPS").   SFAS No. 128 replaces  the  presentation  of
   primary  EPS  previously prescribed by Accounting Principles  Board
   Opinion  No.  15 ("APB No. 15") with a presentation of  basic  EPS,
   which   is   computed  by  dividing  income  available  to   common
   stockholders  by  the  weighted-average  number  of  common  shares
   outstanding  for  the  period.  SFAS No.  128  also  requires  dual
   presentation  of  basic and diluted EPS.  Diluted EPS  is  computed
   similar  to  fully diluted EPS pursuant to APB No. 15.   Pro  forma
   basic  and  diluted  EPS  for  all  historical  periods  presented,
   assuming that SFAS No. 128 was effective at the beginning  of  each
   such  historical  period,  would not be materially  different  from
   what has been presented using APB No. 15.


<PAGE>                                           PAGE 6 OF 11 PAGES


               AMERICAN INDEMNITY FINANCIAL CORPORATION
                           AND SUBSIDIARIES

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF OPERATIONS
             ______________________________________________

LIQUIDITY
      The  Company  has  consistently been able to  generate  adequate
amounts  of  cash to meet its needs and management is unaware  of  any
trends, demands or commitments which will or are reasonably likely  to
have a significant effect on the Company's liquidity.

  Operating Activities
      The net cash flow from operating activities for the three months
ended March 31, 1997 was negative primarily as a result of unfavorable
underwriting  results in the commercial automobile  line  of  business
compared  with the three months ended March 31, 1996.  The unfavorable
underwriting  results for the commercial automobile line  of  business
during  the  first  three months of 1997 were  due  primarily  to  the
occurrence   of  several  large  liability  claims  in   the   period.
Management believes that these claims are not indicative of a trend.

      The net cash flow from operating activities for the three months
ended  March 31, 1996 was negative primarily as a result  of  an  8.1%
decrease in net premiums written compared with the three months  ended
March  31,  1995.  The decrease in net written premiums  is  primarily
attributable to a reduction in the number of policies written  in  the
personal  automobile and workers' compensation lines of  business  and
increased  rates charged to the Company on renewal of certain  of  its
reinsurance contracts for the same comparison periods.

  Investing Activities
      The net cash flow from investing activities was positive for the
first  three  months  of  1997  because  total  investment  sales  and
maturities  exceeded  total investment purchases.   During  the  first
three   months  of  1997,  the  Company's  cash  flow  from  operating
activities  was negative.  As a result, additional funds  were  raised
through   the  sale  of  investments.   However,  whenever   possible,
management  invested  a  portion of available cash  balances  and  the
proceeds  received  from  disposition of investments  into  investment
grade bonds and common stocks.

      During  the  first  three months of 1997, unrealized  investment
losses  decreased stockholders' equity by approximately  $831,000,  of
which  approximately $329,000 of this amount was from debt securities,
with  the  remaining losses from equity securities.  These  unrealized
investment losses were primarily the result of the negative effects of
increased  interest  rates on the Company's  debt  securities  and  an
overall decline in investment market conditions during the first three
months of 1997.

      The  $329,000  unrealized investment losses on  debt  securities
included approximately $312,000 unrealized investment gains related to
six  derivative issues purchased by the Company in 1993.  On March 31,
1997,  the value carried in the Company's balance sheet for these  six
issues  was approximately $19,062,000.  The Company's debt and  equity
securities  are  reported  on the Company's  balance  sheet  at  their
respective  market  values which fluctuate based  upon  a  variety  of
market  factors.   Such fluctuations will result  in  changes  to  the
Company's  unrealized  investment gains or  losses  and  will  have  a
corresponding  impact  on  the Company's  stockholders'  equity.   The
derivative  securities  previously   mentioned  are  known  as inverse 

<PAGE>                                           PAGE 7 OF 11 PAGES


floaters as their  yields,  which  are   adjusted  periodically,  vary
inversely to certain LIBOR rates.   These  derivative  securities will
probably exacerbate swings  in  unrealized investment gains and losses
and stockholders' equity  in the  event  of  significant  movement  in
interest  rates,  particularly  LIBOR  rates.  Additionally, the yield
formulas for these securities will  result  in commensurate  swings in
investment income. At current yield rates and considering future yield
resets for these securities  and the guarantee (see  discussion below)
that was obtained with respect to  certain  of these  securities,  net
investment  income during the final three quarters of 1997  should not
change significantly  compared  to  the corresponding period in  1996.
This is subject to change, either positively or negatively,  depending
on  future  investment  market conditions.

      Because  these derivative securities were issued  by  government
agencies,  the  Company believes that their principal  is  assured  at
maturity.   Barring  unforeseen circumstances,  the  Company  has  the
ability  to  hold  these debt securities until their stated  maturity.
However,  if  conditions  are  favorable for  their  disposition,  the
Company  may dispose of all or a portion of these securities prior  to
maturity.   As  a matter of investment policy, the Company  no  longer
invests in inverse floating rate securities.

     In connection with an arbitration proceeding in 1995, the Company
received  an  agreement, effective December 8, 1995, guaranteeing  the
yield  rate  on  the largest derivative issue held by  it  (Guaranteed
Yield  Security).  The Guaranteed Yield Security has a  par  value  of
$11,000,000  and  matures  in March 1998.   The  yield  rate  that  is
guaranteed  will equal the weekly average yield rate for  three  month
treasury  bills  during each interest period  of  the  security.   The
maximum  amount  guaranteed  is  $1,500,000  and  the  guarantee  will
terminate no later than the security's maturity date.  As of March 31,
1997,   the   remaining  amount  guaranteed,  reduced  by  settlements
received,  is  approximately $835,000.  This guarantee was  originally
secured  by  two letters of credit.  One letter of credit  is  in  the
amount  of  $500,000 and expires two years from its issue  date.   The
second  letter of credit in the amount of $500,000 expired in December
1996.   At March 31, 1997, the stated interest rate for the Guaranteed
Yield  Security  was .063% and the guaranteed yield  rate  was  5.30%.
Based  on  such guaranteed yield rate, and assuming no change  in  the
yield  rate  that determines the guaranteed yield rate, net investment
income earned by this security during the final three quarters of 1997
should not change significantly compared with the corresponding period
in 1996.

      As a result of this guarantee, the yield of the Guaranteed Yield
Security is similar to that of a floating rate instrument whose coupon
yield  resets  weekly to the average three month treasury  bill  yield
rate  during each interest period.  The market value of this  security
at March 31, 1997 was determined based upon the market values of other
securities  with  similar yield resets and similar maturities.   As  a
result, the market value for this security as carried on the Company's
balance sheet as of March 31, 1997 was approximately $10,984,000.

      During  the  first three months of 1996, management  invested  a
portion of available cash balances and the proceeds received from  the
disposition  of  investments into investment grade  bonds  and  common
stocks.   The net cash flow from investing activities was negative  in
the  first three months of 1996 as total investment purchases exceeded
total investment sales and maturities.

<PAGE>                                           PAGE 8 OF 11 PAGES


  Financing Activities
     There were no new financing commitments entered into in the first
three  months  of  1997 and no significant increase  in  the  cost  of
current  financing  arrangements.  The net cash  flow  from  financing
activities was negative for the first three months of 1997 as a result
of cash dividends paid to stockholders.  During the first three months
of  1997, the Company received approximately $71,000 in proceeds  from
the  exercise  of incentive stock options, whereas, during  the  first
three months of 1996 there were no incentive stock options exercised.

      In January, 1996, the Company received $580,500 proceeds from  a
loan  from United States National Bank.  These funds were obtained  to
finance  the purchase of computer software designed to provide  policy
processing, claims administration, billing and collection, reinsurance
and  management  reporting  needed as part of  the  Company's  ongoing
effort  to enhance its technology and reengineer its business process.
As  a result of this loan, the net cash flow from financing activities
was positive for the first three months of 1996.

CAPITAL RESOURCES
      The  activities  of insurance companies are regulated  by  state
authorities  and  adequate levels of reserves and equity  capital  are
required to be maintained to ensure that enough capital is retained in
the  business  to  provide sufficient funds to meet  its  obligations.
Management  believes  that  the Company  has  met  all  statutory  and
regulatory  requirements and that sufficient funds have been  retained
to  meet  its obligations.  The Company has no current commitments  or
plans for debt or equity financing.

RESULTS OF OPERATIONS
     Premiums earned decreased 5.5% and net premiums written decreased
9.4% for the three months ended March 31, 1997 compared with the three
months ended March 31, 1996 primarily as a result of experience  based
premium  increases  due reinsurors charged to the  Company  under  the
retrospective   premium   adjustment  provisions   of   its   casualty
reinsurance contract.

      As  previously  discussed, the Company raised  additional  funds
through the sale of investments to offset the negative cash flow  from
unfavorable operating results during the first three months  of  1997.
This,  combined  with  the  unrealized  losses  in  market  value   of
investments  experienced  during  the  first  three  months  of  1997,
resulted  in  a  decrease in average invested assets of  approximately
$2,248,000   at  March  31,  1997  compared  with  March   31,   1996.
Additionally,  net  investment income decreased  4.8%  for  the  three
months ended March 31, 1997 compared with the three months ended March
31,  1996, primarily as a result of the sale of invested assets.  This
decrease  in  net  investment  income reduced  the  Company's  average
investment  yield to 5.06% for the three months ended March  31,  1997
compared with 5.18% for the three months ended March 31, 1996.

<PAGE>                                           PAGE 9 OF 11 PAGES


      The  loss  and loss adjustment expense ratio was 72.5%  for  the
three  months ended March 31, 1997 compared with 64.7% for  the  three
months  ended  March  31,  1996.   The  underwriting  results  of  the
commercial automobile line of business were unfavorable for the  three
months ended March 31, 1997 compared with the three months ended March
31,  1996.   The  unfavorable underwriting results for the  commercial
automobile line of business during the first three months of 1997 were
due  primarily to the occurrence of several large liability claims  in
the period.

      The policy acquisition cost ratio was 38.5% for the three months
ended  March  31, 1997 compared with 37.6% for the three months  ended
March 31, 1996.  The increase in this ratio was primarily a result  of
the  decrease in premiums earned and increased expenses related to the
ongoing conversion of our computer system.

      Primarily as a result of the decrease in premiums earned and the
unfavorable  underwriting results during the  first  three  months  of
1997,  the  net loss of the Company was approximately $259,000  during
the   first  three  months  of  1997  compared  with  net  income   of
approximately $1,066,000 during the first three months of 1996.


<PAGE>                                           PAGE 10 OF 11 PAGES

                                   
                                   
               AMERICAN INDEMNITY FINANCIAL CORPORATION
                           AND SUBSIDIARIES
                                   
                                   
                                   
                                   
Item 6. (a)   Exhibit 11 -   Computation of Fully Diluted  Net
              Income per Common and Common Equivalent Share.

              Exhibit 27 -   Financial Data Schedule.

        (b)   Reports on Form 8-K

              No  reports  on  Form 8-K have been  filed  during  the
              quarter for which this report is filed.







                              SIGNATURES
                              __________

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





                               AMERICAN INDEMNITY FINANCIAL CORPORATION
                               ________________________________________
                                             (Registrant)





Date    MAY 13, 1997                       PHILLIP E. APGAR
     ________________       ___________________________________________
                                           PHILLIP E. APGAR
                                  VICE PRESIDENT-TREASURER - CHIEF
                                          FINANCIAL OFFICER
                             (PRINCIPAL FINANCIAL & ACCOUNTING OFFICER)

                                                 PAGE 10 OF 11 PAGES