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 September 30, 1996
                                  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 November 8, 1996, 1,948,110 shares of registrant's common stock,
$3.33 1/3 par value, were outstanding.

                                                   PAGE 1 OF 12 PAGES
<PAGE>


               AMERICAN INDEMNITY FINANCIAL CORPORATION
                           AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
             Consolidated Statements of Operations for the
            Three Months Ended September 30, 1996 and 1995
                               Unaudited

                                                     1996           1995
                                                    ______         ______
PREMIUMS AND OTHER INCOME:                                  
  Premiums earned                                $16,634,182    $17,243,770
  Net investment income (net of investment
    expenses of $100,733 in 1996 and $94,433
    in 1995)                                       1,179,821        968,835 
  Realized investment gains                          425,092         88,098
  Interest on premium bills receivable and
    other income                                     192,258        185,342
                                                 ____________   ____________
            TOTAL                                 18,431,353     18,486,045
                                                 ____________   ____________
EXPENSES:                                                   
  Losses and loss adjustment expenses             11,409,360     12,490,046
  Policy acquisition costs                         6,336,561      6,310,921
  Retrospective premium adjustments on workers'
    compensation policies                            (11,499)       375,568
                                                 ____________   ____________
            TOTAL                                 17,734,422     19,176,535
                                                 ____________   ____________
INCOME (LOSS) BEFORE FEDERAL INCOME TAX              696,931       (690,490)

CREDIT FOR FEDERAL INCOME TAX:
  Current                                                           (13,088)
  Deferred
                                                 ____________   ____________
            TOTAL                                                   (13,088)
                                                 ____________   ____________
NET INCOME (LOSS)                                $   696,931    $  (677,402)
                                                 
AVERAGE SHARES OUTSTANDING                         1,948,610      1,946,843

EARNINGS PER SHARE:                                         
  NET INCOME (LOSS)                              $       .36    $      (.34)
                                                   
DIVIDENDS DECLARED PER SHARE                     $      .075    $      .075


                    See Notes to Consolidated Financial Information

                                                    PAGE 2 OF 12 PAGES
<PAGE>

               AMERICAN INDEMNITY FINANCIAL CORPORATION
                           AND SUBSIDIARIES

             Consolidated Statements of Operations for the
             Nine Months Ended September 30, 1996 and 1995
                               Unaudited
                                                     1996           1995
                                                    ______         ______
PREMIUMS AND OTHER INCOME:                                  
  Premiums earned                                $49,644,191    $51,158,487
  Net investment income (net of investment
    expenses of $294,793 in 1996 and $290,622
    in 1995)                                       3,411,671      2,965,137
  Realized investment gains (losses)                 648,917          7,212
  Interest on premium bills receivable and
    other income                                     548,352        549,530
                                                 ____________   ____________
            TOTAL                                 54,253,131     54,680,366
EXPENSES:                                                   
  Losses and loss adjustment expenses             35,526,326     38,544,783
  Policy acquisition costs                        18,163,866     18,939,513
  Retrospective premium adjustments on
    workers' compensation policies                   (32,807)       955,030
                                                 ____________   ____________

            TOTAL                                  53,657,385     58,439,326
                                                 ____________   ____________

INCOME (LOSS) BEFORE FEDERAL INCOME TAX               595,746     (3,758,960)

PROVISION (CREDIT) FOR FEDERAL INCOME TAX:
  Current                                                            (13,088)
  Deferred
                                                 ____________   _____________
            TOTAL                                                    (13,088)

NET INCOME (LOSS)                                $    595,746   $ (3,745,872)

AVERAGE SHARES OUTSTANDING                          1,947,910      1,946,754

EARNINGS PER SHARE:
  NET INCOME (LOSS)                              $        .31   $      (1.92)

DIVIDENDS DECLARED PER SHARE                     $       .225   $        .21



            See Notes to Consolidated Financial Information

                                                      PAGE 3 OF 12 PAGES
<PAGE>
               AMERICAN INDEMNITY FINANCIAL CORPORATION
                           AND SUBSIDIARIES

                      Consolidated Balance Sheets
               September 30, 1996 and December 31, 1995
                               Unaudited

ASSETS                                               1996            1995
                                                   _______          _______
Investments:
 Fixed maturities - bonds:
   Available for sale                            $ 73,862,163    $ 72,578,178
 Preferred stocks                                   1,454,762       2,289,472
 Common stocks                                     10,432,919      11,895,516
 Mortgage loans on real estate                         20,980          24,604
 Short-term investments                                50,000          60,000
                                                 _____________   _____________
        Total Investments                          85,820,824      86,847,770
Cash and Cash Equivalents                           4,001,710       4,781,566
Accrued Investment Income                             824,723         711,185
Premiums in Course of Collection                    6,132,474       4,293,569
Direct Premium Bills Receivable                     9,586,258       8,267,740
Reinsurance Balances Receivable                    13,038,618      12,167,759
Prepaid Reinsurance Premiums                          646,408         716,632
Property and Equipment - Less accumulated deprecia-
  tion of $4,954,633 in 1996 and $4,614,370 in 1995 4,110,319       4,202,742
Deferred Policy Acquisition Costs                   9,555,199       8,841,705
Deferred Income Taxes                               4,498,000       4,498,000
Other Assets                                        3,285,412       2,785,268
                                                 _____________   _____________
        TOTAL                                    $141,499,945    $138,113,936

LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________
Losses and Loss Adjustment Expenses              $ 52,256,326    $ 51,165,424
Unearned Premiums                                  36,824,032      34,489,378
Reinsurance Balances Held or Payable                3,364,847       2,844,698
Notes Payable to Bank                                 535,745
Accounts Payable and Other Accrued Liabilities      9,561,443       9,085,322
                                                 _____________   _____________
        Total Liabilities                         102,542,393      97,584,822
                                                 _____________   _____________
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 1,949,110
   in 1996 and 1,947,110 in 1995                    6,497,018       6,490,351
 Paid-in surplus                                   13,053,178      13,047,085
 Unrealized appreciation in market value of
   investments                                        642,703       2,384,456
 Retained earnings                                 18,764,653      18,607,222
                                                 _____________   _____________
        Total Stockholders' Equity                 38,957,552      40,529,114
                                                 _____________   _____________
        TOTAL                                    $141,499,945    $138,113,936



            See Notes to Consolidated Financial Information
                                                           PAGE 4 OF 12 PAGES
<PAGE>

               AMERICAN INDEMNITY FINANCIAL CORPORATION
                           AND SUBSIDIARIES

             Consolidated Statements of Cash Flows for the
             Nine Months Ended September 30, 1996 and 1995
                               Unaudited

OPERATING ACTIVITIES:                                 1996            1995
                                                     _______         _______

Net income (loss)                                 $   595,746    $ (3,745,872)
 Adjustments to reconcile net income (loss) to
   net cash flow from operating activities:
   Decrease (Increase) in:
     Premiums in course of collection              (1,838,905)     (1,050,161)
     Direct premium bills receivable               (1,318,518)     (1,125,126)
     Reinsurance balances receivable                 (870,859)     (1,112,636)
     Prepaid reinsurance premiums                      70,224         570,856
     Deferred policy acquisition costs               (713,494)       (383,505)
     Other assets                                    (500,144)       (206,063)
   Increase (Decrease) in:
     Unpaid losses and loss adjustment expenses     1,090,902       1,613,324
     Unearned premiums                              2,334,654       1,839,955
     Reinsurance balances held or payable             520,149        (661,759)
     Accounts payable and other accrued
       liabilities                                    476,121       1,321,628
   Realized investment gains                         (648,917)         (7,212)
   Depreciation                                       340,263         285,705
   Other                                              (10,752)        (23,894)
                                                 _____________   _____________
     Net cash flow from operating activities         (473,530)     (2,684,760)
                                                 _____________   _____________
INVESTING ACTIVITIES:
 Sale of bonds                                      6,939,258       5,166,266
 Maturity of bonds                                  7,119,196       3,263,596
 Sale of preferred stocks                             184,396          49,338
 Redemption of preferred stocks                       605,368         170,018
 Sale of common stocks                              2,881,265       5,431,904
 Maturity of long-term certificates of deposit         10,000
 Purchase of bonds                                (16,856,177)    (11,308,905)
 Purchase of common stocks                         (1,000,606)       (248,500)
 Purchase of property and equipment                  (302,840)       (605,622)
 Other                                                  3,624           3,281
                                                 _____________   _____________
     Net cash flow from investing activities         (416,516)      1,921,376
                                                 _____________   _____________
FINANCING ACTIVITIES:

 Proceeds received from bank loan                     580,500
 Payments on bank loan                                (44,755)
 Cash dividends paid to stockholders                 (438,315)       (408,811)
   Proceeds received from exercise of stock
     options                                           12,760           2,552
                                                 _____________   _____________
     Net cash flow from financing activities          110,190        (406,259)
                                                 _____________   _____________ 
     Net Decrease in Cash and Cash Equivalents       (779,856)     (1,169,643)
     Cash and Cash Equivalents, January 1           4,781,566       4,937,544
                                                 _____________   _____________
     Cash and Cash Equivalents, September 30     $  4,001,710    $  3,767,901


            See Notes to Consolidated Financial Information
                                                         PAGE 5 OF 12 PAGES
<PAGE>

               AMERICAN INDEMNITY FINANCIAL CORPORATION
                           AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL INFORMATION
                             (UNAUDITED)
______________________________________________________________________

(1)The  consolidated  financial statements  include  the  accounts  of
   American  Indemnity Financial Corporation (the "Company"), American
   Indemnity  Company  and  American Indemnity Company's  wholly-owned
   subsidiaries,  American Fire and Indemnity Company,  Texas  General
   Indemnity  Company  and American Computing Company.   All  material
   intercompany  balances  and transactions have  been  eliminated  in
   consolidation.   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,
   1995.   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 September 30, 1996 and December 31, 1995 are  as
   follows:

                               September 30, 1996   December 31, 1995
                              ____________________ ___________________
Deferred tax liabilities:
Deferred  policy acquisition costs $ (3,248,768)       $ (3,006,180)
Differences between book and tax       (325,741)           (300,935)
  basis of property
Unrealized investment gains            (218,519)           (810,715)
Other                                  (412,533)           (403,926)
                                   _____________       _____________
                                     (4,205,561)         (4,521,756)
                            
Deferred tax assets:
Reserves not currently deductible     5,646,920           6,013,565
Operating loss carryforwards         12,212,277          11,824,122
                                   _____________       _____________
                                     17,859,197          17,837,687
                           
Net Asset                            13,653,636          13,315,931
Valuation allowance                  (9,155,636)         (8,817,931)
                                   _____________       _____________
Net deferred tax assets            $  4,498,000        $  4,498,000


   The  provision  for income tax for the nine months ended  September
   30,  1996  was  $-0-.  The Company paid $15,000 in  federal  income
   taxes  during  the first nine months of 1996, whereas  the  Company
   did  not pay any federal income taxes during the first nine  months
   of  1995.  The provision for federal income tax for the nine months
   ended  September  30, 1995 is related to taxes  arising  under  the
   alternative  minimum tax system which is based on reported  income,
   adjusted  for differences arising in revenue or expense items,  per
   applicable  tax laws and regulations, between reported  income  and
   taxable income.
                                                   PAGE 6 OF 12 PAGES
<PAGE>
   The  Company has a net operating loss carryforward for tax purposes
   of  $35,918,462, 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-
   $4,663,854 and 2011-$1,141,633.

(3)The  Company  paid total interest expense of $28,372 for  the  nine
   months  ended September 30, 1996 and paid no interest for the  nine
   months ended September 30, 1995.

(4)In  October  1995, the Financial Accounting Standards Board  issued
   Statement  of  Financial  Accounting Standards  ("SFAS")  No.  123,
   "Accounting  for Stock-Based Compensation," which is effective  for
   the  Company  on January 1, 1996.  SFAS No. 123 permits,  but  does
   not  require, a fair value based method of accounting for  employee
   stock  option  plans  which results in compensation  expense  being
   recognized  in  the  results of operations when stock  options  are
   granted.   The  Company  decided  not  to  change  its  method   of
   accounting  for stock-based compensation; therefore,  the  adoption
   of  this  statement  will  not have any  impact  on  the  financial
   statements of the Company.

                                                  PAGE 7 OF 12 PAGES
<PAGE>

               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 nine months
ended  September  30,  1996  was negative primarily  as  a  result  of
unfavorable  underwriting results.  Although the underwriting  results
for  the  first nine months of 1996 improved compared with  the  first
nine  months  of  1995,  cash  flow  from  operating  activities   was
insufficient to cover the payment of claims and underwriting expenses.
Weather-related natural catastrophes occurring during the nine  months
ended  September 30, 1996 improved significantly over the same  period
in  1995.   Nevertheless, the unfavorable underwriting results  during
the first nine months of 1996 were caused primarily by several weather-
related catastrophes during the second quarter of 1996.  For the first
nine months of 1996, weather-related natural catastrophes  resulted in
losses of  approximately $3,039,000  compared with  $5,696,000 for the
nine months ended September 30, 1995.

      The  net cash flow from operating activities for the nine months
ended  September 30, 1995 was negative primarily as  a  result  of  an
increase in the amount of funds required for the payment of claims, an
increase  in policy acquisition costs and a decrease in net investment
income.   The negative effect on cash flow of these items  was  offset
somewhat by an increase in net premiums written.  The amount of  funds
required  for  claim  payments increased primarily  due  to  increased
weather-related losses and the settlement of several large  commercial
automobile liability claims during the first nine months of 1995.  The
increase  in  policy  acquisition costs  resulted  from  increases  in
amortization of deferred policy acquisition costs, expenses related to
commissions  and  overhead expenses.  Net investment income  decreased
primarily  as  a result of reduced yields on the Company's  derivative
securities discussed below.

  Investing Activities
      During  the  first  nine 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 nine months of 1996 as total investment purchases  exceeded
total investment sales and maturities.

      During  the  first  nine months of 1996,  unrealized  investment
losses  decreased  stockholders' equity by  approximately  $1,742,000.
These  unrealized  losses  are  comprised  of  unrealized  losses   of
approximately $1,529,000 from debt securities and unrealized losses of
approximately  $213,000  from  equity  securities.   These  unrealized
investment losses were primarily the result of the negative effects of
increased  interest  rates on the market value of the  Company's  debt
securities during the first nine months of 1996.

      Approximately  $361,000 of the $1,529,000 unrealized  investment
losses  on  debt  securities  was related to  nine  derivative  issues
purchased  by the Company in 1993.  On September 30, 1996,  the  value
carried  in  the  Company's balance sheet for  these  six  issues  was
approximately  $18,718,000.  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

                                                   PAGE 8 OF 12 PAGES
<PAGE>

fluctuations will  result  in  changes  to  the  Company's  unrealized
investment gains or losses  and will have corresponding impacts on the
Company's stockholders' equity.  The  derivative securities  mentioned
above  are  known  as  inverse  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  in  1995 with respect to
certain  of  these  securities,  net  investment  income for the final
quarter of 1996  should  be  increased  by  approximately  $96,000  as
compared  to the corresponding period  in  1995.   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.  During the first nine months of 1996, the Company was  able
to  reduce its exposure in such securities by the sale of $750,000 par
value  of  one  issue of the derivative securities.  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 (Guarantee 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.  This guarantee
is  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 is also in the amount of $500,000 and expires
in  one  year,  provided  that, in the event of  certain  defaults  in
financial covenants, an additional letter of credit is provided in the
amount of $250,000 for a second twelve month period.  At September 30,
1996  the  stated interest rate for the Guaranteed Yield Security  was
0.039%  and  the  guaranteed yield rate  was  5.03%.   Based  on  such
guarantee  yield rate, net investment income earned by  this  security
during  the final quarter of 1996 should be increased by approximately
$105,000 compared to the corresponding period in 1995.  The amount may
increase  or  decrease, however, depending on changes in  the  average
yield  rate  of  the  three month treasury bill  that  determines  the
guaranteed yield on this security.

      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  September 30, 1996 was determined based upon the market values  of
other securities with similar yield resets and similar maturity dates.
As  a  result,  the market value for this security as carried  on  the
Company's   balance   sheet  September  30,  1996  was   approximately
$10,959,000.

                                                   PAGE 9 OF 12 PAGES
<PAGE>

      During the first nine months of 1995, management invested  funds
which  were  generated  from the disposition of investments,  together
with a portion of available cash balances, into investment grade bonds
and  common  stocks.  The net cash flow from investing activities  was
positive  for the first nine months of 1995 as total investment  sales
and maturities exceeded total investment purchases.

  Financing Activities
      In January, 1996, the Company received $580,500 proceeds from  a
loan  from  United States National Bank.  The Company is  required  to
make  seventy-two monthly payments at an interest rate of 8.75%  until
the  maturity  date  of  February 1, 2002.  The  Company  may  pre-pay
without  penalty all or a portion of the principal.  These funds  were
obtained  to  finance  the purchase of computer software  designed  to
provide   policy  processing,  claims  administration,   billing   and
collection and 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 nine  months  of
1996.   The  net cash flow from financing activities was negative  for
the  first nine months of 1995 as a result of cash dividends  paid  to
stockholders.

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 other than the loan discussed under
"Liquidity-Financing Activities".

RESULTS OF OPERATIONS
      Premiums earned decreased 3.5% and 3.0%, respectively, for three
months  and  nine  months ended September 30, 1996 compared  with  the
corresponding 1995 periods.  Net premiums written decreased  6.7%  and
2.8%,  respectively,  for  the  three months  and  nine  months  ended
September 30, 1996 compared with the same 1995 periods.  The  decrease
in premiums is primarily attributable to decreases in new business for
the  commercial lines of business and the personal automobile line  of
business  and  increased rates charged to the Company  on  renewal  of
certain of its reinsurance contracts.  The  decreases in new  business
are  primarily the result of strong competition  in a soft market  and
the Company's conservative pricing and strict underwriting standards.  

      Primarily as a result of the unrealized gains in market value of
investments experienced in 1995, average invested assets at  September
30, 1996 increased approximately $4,087,000 compared with
September  30,  1995.  Additionally, net investment  income  increased
21.8%  and  15.1%, respectively, for the three months and nine  months
ended  September  30,  1996  compared  with  the  same  1995  periods,
primarily  as a result of increased yields on the Company's derivative
securities.   This  increase in net investment  income  increased  the
Company's average investment yield to 5.27% for the nine months  ended
September  30,  1996  compared with 4.81% for the  nine  months  ended
September  30, 1995.  Based on the guaranteed yield rate at  September
30,  1996  on the $11,000,000 par value derivative security  discussed
above,  net  investment  income earned  by  this  security  should  be
increased by approximately $105,000 during the final quarter  of  1996
compared  to  the corresponding period in 1995.  This  is  subject  to
change, either positively or negatively, depending on changes  in  the
average three month treasury bill yield that determines the guaranteed
yield rate.

                                                   PAGE 10 OF 12 PAGES
<PAGE>

      In  an  effort  to maximize the overall return on the  Company's
investment   portfolio,  management  elected  to  take  advantage   of
favorable  market  conditions and sold several issues  of  common  and
preferred  stocks  and fixed maturity bonds which  were  held  in  the
investment   portfolio.   As  a  result,  realized  investment   gains
increased  for  the three months and nine months ended  September  30,
1996 compared with the same 1995 comparison periods.

      The  loss  and loss adjustment expense ratio was 68.6%  for  the
three  months  ended September 30, 1996 compared with  72.4%  for  the
three  months  ended  September 30, 1995 and was 71.6%  for  the  nine
months  ended  September 30, 1996 compared with  75.3%  for  the  nine
months  ended September 1995.  This decrease was primarily the  result
of  a smaller number and decreased severity of weather-related natural
catastrophes  during the first nine months of 1996 compared  with  the
first  nine  months  of  1995.   Claims from  weather-related  natural
catastrophes  resulted in approximately $525,000  in  losses  for  the
third  quarter  ended September 30, 1996, compared with  approximately
$1,028,000  for the third quarter ended September 30, 1995.   For  the
nine   months  ended  September  30,  1996,  weather-related   natural
catastrophes  resulted in losses of approximately $3,039,000  compared
with $5,696,000 for the nine months ended September 30, 1995.

      The policy acquisition cost ratio was 38.1% for the three months
ended  September  30, 1996 compared with 36.6% for  the  three  months
ended  September 30, 1995.  The increase in this ratio  was  primarily
the result of policy acquisition costs remaining essentially unchanged
with a decrease of 3.5% in premiums earned during the third quarter of
1996  compared with the third quarter of 1995.  The policy acquisition
cost  ratio  was 36.6% for the nine months ended September  30,  1996,
compared with 37.0% for the nine months ended September 30, 1995.  The
decrease  in  this ratio was a result of an increase  in  deferral  of
policy acquisition costs during the first nine months of 1996 compared
with the first nine months of 1995.

      The net income of the Company was approximately $697,000 for the
three  months  ended  September 30, 1996 compared  with  net  loss  of
$677,000  for  the  three months ended September 30,  1995.   The  net
income  of the Company was approximately $596,000 for the nine  months
ended September 30, 1996 compared with net loss of $3,746,000 for  the
nine  months  ended  September 30, 1995.   This  improvement  resulted
primarily  from  the  decrease in claims from weather-related  natural
catastrophes, the increase in net investment income, and the  realized
investment  gains  during  the  three months  and  nine  months  ended
September 30, 1996 compared with the same 1995 comparison periods.

                                                   PAGE 11 OF 12 PAGES
<PAGE>

               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    NOVEMBER 12, 1996                     PHILLIP E. APGAR
     _______________________     __________________________________________
                                              PHILLIP E. APGAR
                                      VICE PRESIDENT-TREASURER - CHIEF
                                             FINANCIAL OFFICER
                                 (PRINCIPAL FINANCIAL & ACCOUNTING OFFICER)

                                                       PAGE 12 OF 12 PAGES