-------------------------------------------------------------------------------
                       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
March 31, 2002                                             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 May 1, 2002, there were 10,593,000 shares of the Registrant's Common
Stock outstanding, all of which were owned by American Financial Group, Inc.












                                  Page 1 of 22
------------------------------------------------------------------------------



<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q
                                     PART I
                              FINANCIAL INFORMATION

                 AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                             (Dollars In Thousands)
<TABLE>
<CAPTION>
                                                                March 31,     December 31,
                                                                    2002             2001
                                                             -----------      -----------
<S>                                                         <C>              <C>
ASSETS:
   Cash and short-term investments                           $   271,532      $   543,644
   Investments:
     Fixed maturities - at market
       (amortized cost - $11,050,249 and $10,593,205)         11,077,749       10,748,605
     Other stocks - at market
       (cost - $180,233 and $187,810)                            319,733          313,710
     Policy loans                                                208,430          211,288
     Real estate and other investments                           259,722          262,801
                                                             -----------      -----------
         Total investments                                    11,865,634       11,536,404

   Recoverables from reinsurers and prepaid
     reinsurance premiums                                      2,341,013        2,286,509
   Agents' balances and premiums receivable                      704,928          666,171
   Deferred acquisition costs                                    852,030          818,323
   Other receivables                                             280,797          254,137
   Variable annuity assets (separate accounts)                   560,821          529,590
   Prepaid expenses, deferred charges and other assets           453,547          451,362
   Goodwill                                                      312,594          312,134
                                                             -----------      -----------

                                                             $17,642,896      $17,398,274
                                                             ===========      ===========
<PAGE>
LIABILITIES AND CAPITAL:
   Unpaid losses and loss adjustment expenses                $ 4,835,895      $ 4,777,580
   Unearned premiums                                           1,720,065        1,640,955
   Annuity benefits accumulated                                5,931,565        5,832,120
   Life, accident and health reserves                            653,458          638,522
   Payable to American Financial Group, Inc.                     348,100          356,689
   Long-term debt:
     Holding companies                                           249,518          228,252
     Subsidiaries                                                270,412          270,752
   Variable annuity liabilities (separate accounts)              560,821          529,590
   Accounts payable, accrued expenses and other
     liabilities                                               1,153,187        1,185,146
                                                             -----------      -----------
         Total liabilities                                    15,723,021       15,459,606

   Minority interest                                             455,021          460,737

   Shareholders' Equity:
     Preferred Stock - at liquidation value                       72,154           72,154
     Common Stock, no par value
       - 20,000,000 shares authorized
       - 10,593,000 shares outstanding                             9,625            9,625
     Capital surplus                                             985,868          984,125
     Retained earnings                                           301,207          255,127
     Unrealized gain on marketable securities, net                96,000          156,900
                                                             -----------      -----------
         Total shareholders' equity                            1,464,854        1,477,931
                                                             -----------      -----------

                                                             $17,642,896      $17,398,274
                                                             ===========      ===========
</TABLE>


                                        2


<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

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


                                                  Three months ended
                                                       March 31,
                                                  -------------------
                                                      2002       2001
                                                      ----       ----
INCOME:
    Property and casualty insurance premiums      $603,908   $644,723
    Life, accident and health premiums              70,935     69,158
    Investment income                              220,959    209,790
    Realized losses on:
      Securities                                   (17,800)    (6,881)
      Subsidiaries                                    -        (1,586)
    Other income                                    47,612     58,292
                                                  --------   --------
                                                   925,614    973,496

COSTS AND EXPENSES:
    Property and casualty insurance:
      Losses and loss adjustment expenses          442,913    496,216
      Commissions and other underwriting expenses  170,266    184,974
    Annuity benefits                                75,525     69,264
    Life, accident and health benefits              55,920     54,083
    Interest charges on borrowed money              11,094     18,873
    Other operating and general expenses           113,311    107,871
                                                  --------   --------
                                                   869,029    931,281
                                                  --------   --------

Operating earnings before income taxes              56,585     42,215
Provision for income taxes                           2,703     14,952
                                                  --------   --------

Net operating earnings                              53,882     27,263

Minority interest expense, net of tax               (5,068)    (6,919)
Equity in net losses of investees, net of tax       (2,734)    (3,334)
                                                  --------   --------

NET EARNINGS                                      $ 46,080   $ 17,010
                                                  ========   ========










                                        3
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

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

                                                       Common Stock              Unrealized
                                         Preferred      and Capital    Retained     Gain on
                                             Stock          Surplus    Earnings  Securities            Total
                                         ---------     ------------    --------  ----------       ----------
<S>                                       <C>             <C>         <C>         <C>           <C>
BALANCE AT JANUARY 1, 2002                 $72,154         $993,750    $255,127    $156,900       $1,477,931

  Net earnings                                -                -         46,080        -              46,080
  Change in unrealized                        -                -           -        (60,900)         (60,900)
                                                                                                  ----------
    Comprehensive income (loss)                                                                      (14,820)

  Capital contribution from parent            -               1,533        -           -               1,533
  Other                                       -                 210        -           -                 210
                                           -------         --------    --------    --------       ----------
BALANCE AT MARCH 31, 2002                  $72,154         $995,493    $301,207    $ 96,000       $1,464,854
                                           =======         ========    ========    ========       ==========





BALANCE AT JANUARY 1, 2001                 $72,154         $984,391    $258,371    $139,200       $1,454,116

  Net earnings                                -                -         17,010        -              17,010
  Change in unrealized                        -                -           -         34,400           34,400
                                                                                                  ----------
    Comprehensive income                                                                              51,410

  Capital contribution from parent            -               3,067        -           -               3,067
  Other                                       -                (174)       -           -                (174)
                                           -------         --------    --------    --------       ----------

BALANCE AT MARCH 31, 2001                  $72,154         $987,284    $275,381    $173,600       $1,508,419
                                           =======         ========    ========    ========       ==========
</TABLE>














                                        4
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

                 AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (In Thousands)
<TABLE>
<CAPTION>
                                                               Three months ended
                                                                    March 31,
                                                            ------------------------
                                                                  2002          2001
                                                                  ----          ----
<S>                                                        <C>             <C>
OPERATING ACTIVITIES:
    Net earnings                                            $   46,080      $ 17,010
    Adjustments:
      Equity in net losses of investees                          2,734         3,334
      Depreciation and amortization                             44,295        36,485
      Annuity benefits                                          75,525        69,264
      Realized (gains) losses on investing activities           17,605        (6,840)
      Deferred annuity and life policy acquisition costs       (38,600)      (35,551)
      Decrease (increase) in reinsurance and other
        receivables                                           (119,921)        4,727
      Increase in other assets                                  (7,997)      (19,369)
      Increase in insurance claims and reserves                152,361        74,616
      Increase (decrease) in other liabilities                  (4,307)       38,419
      Increase in minority interest                              3,284         4,095
      Other, net                                                   321          (434)
                                                            ----------      --------
                                                               171,380       185,756
                                                            ----------      --------
INVESTING ACTIVITIES:
    Purchases of and additional investments in:
      Fixed maturity investments                            (1,499,179)     (544,186)
      Equity securities                                           -           (2,571)
      Real estate, property and equipment                       (4,518)      (13,278)
    Maturities and redemptions of fixed maturity
      investments                                              408,962       131,547
    Sales of:
      Fixed maturity investments                               597,159       194,182
      Equity securities                                          5,164         4,679
      Subsidiaries                                                -           22,000
      Real estate, property and equipment                        1,669        24,562
    Cash and short-term investments of former
      subsidiaries                                                -         (132,858)
    Decrease (increase) in other investments                     3,368          (673)
                                                            ----------      --------
                                                              (487,375)     (316,596)
                                                            ----------      --------
<PAGE>
FINANCING ACTIVITIES:
    Fixed annuity receipts                                     169,872       126,223
    Annuity surrenders, benefits and withdrawals              (135,912)     (186,921)
    Net transfers from (to) variable annuity assets             (5,570)        2,929
    Additional long-term borrowings                             41,000        26,842
    Reductions of long-term debt                               (20,240)      (47,601)
    Borrowings from AFG                                          4,400         1,000
    Payments to AFG                                            (12,000)      (23,000)
    Capital contribution                                         2,333         4,667
                                                            ----------      --------
                                                                43,883       (95,861)
                                                            ----------      --------

NET DECREASE IN CASH AND SHORT-TERM INVESTMENTS               (272,112)     (226,701)

Cash and short-term investments at beginning
    of period                                                  543,644       437,263
                                                            ----------      --------

Cash and short-term investments at end of period            $  271,532      $210,562
                                                            ==========      ========
</TABLE>




                                        5


<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


A.    ACCOUNTING POLICIES

      BASIS OF PRESENTATION The accompanying consolidated financial statements
      for American Financial Corporation ("AFC") and subsidiaries are unaudited;
      however, management believes that all adjustments (consisting only of
      normal recurring accruals unless otherwise disclosed herein) necessary for
      fair presentation have been made. The results of operations for interim
      periods are not necessarily indicative of results to be expected for the
      year. The financial statements have been prepared in accordance with the
      instructions to Form 10-Q and therefore do not include all information and
      footnotes necessary to be in conformity with generally accepted accounting
      principles.

      Certain reclassifications have been made to prior years to conform to the
      current year's presentation. All significant intercompany balances and
      transactions have been eliminated. All acquisitions have been treated as
      purchases. The results of operations of companies since their formation or
      acquisition are included in the consolidated financial statements.

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

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

      Gains or losses on securities are determined on the specific
      identification basis. When a decline in the value of a specific investment
      is considered to be other than temporary, a provision for impairment is
      charged to earnings and the cost basis of that investment is reduced.

      Emerging Issues Task Force Issue No. 99-20 established a new standard for
      recognizing interest income and impairment on certain asset-backed
      investments. Interest income on these investments is recorded at a yield
      based on projected cash flows. The yield is adjusted prospectively to
      reflect actual cash flows and changes in projected amounts. Impairment
      losses on these investments must be recognized when (i) the fair value of
      the security is less than its cost basis and (ii) there has been an
      adverse change in the expected cash flows. The new standard became
      effective on April 1, 2001. Impairment losses on initial application of
      this rule were recognized as the cumulative effect of an accounting
      change. Subsequent impairments are recognized as a component of net
      realized gains and losses.
<PAGE>
      GOODWILL Goodwill represents the excess of cost of subsidiaries over AFC's
      equity in their underlying net assets. Through December 31, 2001, goodwill
      was being amortized over periods of 20 to 40 years. Effective January 1,
      2002, AFC implemented Statement of Financial Accounting Standards ("SFAS")
      No. 142, under which goodwill is no longer amortized but is subject to an
      impairment test at least annually. As required under SFAS No. 142, AFC
      will complete the transitional test for goodwill impairment (as of January
      1, 2002) by the end of 2002. Any resulting write-down will be reported by
      restating first quarter 2002 results for the cumulative effect of a change
      in accounting principle.

                                        6
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


      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 agreements
      covering reinsurance ceded, AFC's insurance subsidiaries would remain
      liable. Amounts recoverable from reinsurers are estimated in a manner
      consistent with the claim liability associated with the reinsured
      policies. AFC's insurance subsidiaries report as assets (a) the estimated
      reinsurance recoverable on unpaid losses, including an estimate for losses
      incurred but not reported, and (b) amounts paid to reinsurers applicable
      to the unexpired terms of policies in force. AFC's insurance subsidiaries
      also assume reinsurance from other companies. Income on reinsurance
      assumed is recognized based on reports received from ceding companies.

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

      DPAC related to annuities and universal life insurance products is
      amortized, with interest, in relation to the present value of expected
      gross profits on the policies. To the extent that realized gains and
      losses result in adjustments to the amortization of DPAC related to
      annuities, such adjustments are reflected as components of realized gains.
      DPAC related to annuities is also adjusted, net of tax, for the change in
      amortization that would have been recorded if the unrealized gains
      (losses) from securities had actually been realized. This adjustment is
      included in unrealized gains (losses) on marketable securities.

      DPAC related to traditional life and health insurance is amortized over
      the expected premium paying period of the related policies, in proportion
      to the ratio of annual premium revenues to total anticipated premium
      revenues.
<PAGE>
            UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES The net liabilities
      stated for unpaid claims and for expenses of investigation and adjustment
      of unpaid claims are based upon (a) the accumulation of case estimates for
      losses reported prior to the close of the accounting period on direct
      business written; (b) estimates received from ceding reinsurers and
      insurance pools and associations; (c) estimates of unreported losses based
      on past experience; (d) estimates based on experience of expenses for
      investigating and adjusting claims and (e) the current state of the law
      and coverage litigation. These liabilities are subject to the impact of
      changes in claim amounts and frequency and other factors. Changes in
      estimates of the liabilities for losses and loss adjustment expenses are
      reflected in the Statement of Earnings in the period in which determined.
      In spite of the variability inherent in such estimates, management
      believes that the liabilities for unpaid losses and loss adjustment
      expenses are adequate.

            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.


                                        7


<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


            LIFE, ACCIDENT AND HEALTH RESERVES Liabilities for future policy
      benefits under traditional life, accident and health policies are computed
      using the net level premium method. Computations are based on anticipated
      investment yield, mortality, morbidity and surrenders and include
      provisions for unfavorable deviations. Reserves established for accident
      and health claims are modified as necessary to reflect actual experience
      and developing trends.

            VARIABLE ANNUITY ASSETS AND LIABILITIES Separate accounts related to
      variable annuities represent deposits invested in underlying investment
      funds on which Great American Financial Resources, Inc. ("GAFRI"), an
      83%-owned subsidiary, earns a fee. Investment funds are selected and may
      be changed only by the policyholder, who retains all investment risk.
      Accordingly, GAFRI's liability for these accounts equals the value of the
      account assets.

            PREMIUM RECOGNITION Property and casualty premiums are earned over
      the terms of the policies on a pro rata basis. Unearned premiums represent
      that portion of premiums written which is applicable to the unexpired
      terms of policies in force. On reinsurance assumed from other insurance
      companies or written through various underwriting organizations, unearned
      premiums are based on reports received from such companies and
      organizations. For traditional life, accident and health products,
      premiums are recognized as revenue when legally collectible from
      policyholders. For interest-sensitive life and universal life products,
      premiums are recorded in a policyholder account which is reflected as a
      liability. Revenue is recognized as amounts are assessed against the
      policyholder account for mortality coverage and contract expenses.

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

      MINORITY INTEREST For balance sheet purposes, minority interest represents
      (i) the interests of noncontrolling shareholders in AFC subsidiaries,
      including preferred securities issued by trust subsidiaries of GAFRI and
      (ii) American Financial Group, Inc.'s ("AFG") direct ownership interest in
      American Premier Underwriters, Inc. ("American Premier" or "APU") and
      American Financial Enterprises, Inc. For income statement purposes,
      minority interest expense represents those shareholders' interest in the
      earnings of AFC subsidiaries as well as accrued distributions on the trust
      preferred securities.
<PAGE>
      INCOME TAXES  AFC files consolidated federal income tax returns which
      include all 80%-owned U.S. subsidiaries, except for certain life insurance
      subsidiaries and their subsidiaries. Deferred income taxes are calculated
      using the liability method. Under this method, deferred income tax assets
      and liabilities are determined based on differences between financial
      reporting and tax bases and are measured using enacted tax rates. Deferred
      tax assets are recognized if it is more likely than not that a benefit
      will be realized.




                                        8
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


      BENEFIT PLANS  AFC provides retirement benefits to qualified employees of
      participating companies through contributory and noncontributory defined
      contribution plans contained in AFG's Retirement and Savings Plan. The
      Company makes all contributions to the retirement fund and matches a
      portion of employee contributions to the savings fund. Employees have been
      permitted to direct the investment of their contributions to independently
      managed investment funds, while Company contributions have been invested
      primarily in securities of AFG and affiliates. Employees are being
      afforded the flexibility to direct the investment of a portion of their
      vested retirement fund account balances (increasing from 12.5% in July
      2002 to 100% in April 2004) from securities of AFG and its affiliates to
      independently managed investment funds. The Plan owns 12% of AFG's
      outstanding common stock. Company contributions are charged against
      earnings in the year for which they are declared.

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

      DERIVATIVES Derivatives included in AFC's Balance Sheet consist primarily
      of investments in common stock warrants (included in other stocks), the
      equity-based component of certain annuity products (included in annuity
      benefits accumulated) and call options (included in other investments)
      used to mitigate the risk embedded in the equity-indexed annuity products.
      Changes in the fair value of derivatives are included in current earnings.

      STATEMENT OF CASH FLOWS For cash flow purposes, "investing activities" are
      defined as making and collecting loans and acquiring and disposing of debt
      or equity instruments and property and equipment. "Financing activities"
      include obtaining resources from owners and providing them with a return
      on their investments, borrowing money and repaying amounts borrowed.
      Annuity receipts, benefits and withdrawals are also reflected as financing
      activities. All other activities are considered "operating". Short-term
      investments having original maturities of three months or less when
      purchased are considered to be cash equivalents for purposes of the
      financial statements.

B.    ACQUISITIONS AND SALES OF SUBSIDIARIES

      MANHATTAN NATIONAL LIFE INSURANCE In March 2002, GAFRI reached an
      agreement to acquire Manhattan National Life Insurance Company ("MNL")
      from Conseco, Inc. for $48.5 million in cash. GAFRI expects to close on
      this transaction in the second quarter of 2002 and to fund this
      acquisition with cash on hand and through reinsurance of up to 90% of the
      business in force. While MNL is not currently writing new policies, the
      company reported over $43 million of statutory renewal premiums in 2001.
      At December 31, 2001, MNL had approximately 90,000 policies in force
      (primarily term life) representing over $12 billion in face amount of
      insurance, statutory assets of $297.8 million and statutory capital and
      surplus of $23.1 million.
<PAGE>
      JAPANESE DIVISION In December 2000, AFC agreed to sell its Japanese
      property and casualty division to Mitsui Marine & Fire Insurance Company
      of America for $22 million in cash and recorded an estimated $10.7 million
      pretax loss. Upon completion of the sale in March 2001, AFC realized an
      additional pretax loss of $1.6 million and deferred a gain of
      approximately $21 million on ceded insurance; the deferred gain is being
      recognized over the estimated settlement period (weighted average of 4
      years) of the ceded claims.
                                        9
<PAGE>

                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


C.    SEGMENTS OF OPERATIONS AFC's property and casualty group is engaged
      primarily in specialty and private passenger automobile insurance
      businesses. The Specialty group includes a highly diversified group of
      specialty business units. Some of the more significant areas are inland
      and ocean marine, California workers' compensation, agricultural-related
      coverages, executive and professional liability, fidelity and surety
      bonds, collateral protection, and umbrella and excess coverages. The
      Personal group writes nonstandard and preferred/standard private passenger
      auto and other personal insurance coverage. AFC's annuity, life and health
      business markets primarily retirement products as well as life and
      supplemental health insurance.
<PAGE>
      The following table (in thousands) shows AFC's revenues and operating
      profit (loss) by significant business segment. Operating profit (loss)
      represents total revenues less operating expenses.

                                                 Three months ended
                                                      March 31,
                                               ----------------------
                                                   2002          2001
                                                   ----          ----
         REVENUES (a)
         Property and casualty insurance:
           Premiums earned:
             Specialty                         $356,415      $316,307
             Personal                           247,203       327,632
             Other lines (b)                        290           784
                                               --------      --------
                                                603,908       644,723
           Investment and other income          100,259       107,335
                                               --------      --------
                                                704,167       752,058
         Annuities, life and health (c)         217,422       217,030
         Other                                    4,025         4,408
                                               --------      --------
                                               $925,614      $973,496
                                               ========      ========
         OPERATING PROFIT (LOSS)
         Property and casualty insurance:
           Underwriting:
             Specialty                         $  5,294     ($  2,230)
             Personal                            (5,239)      (27,782)
             Other lines (b)                     (9,326)       (6,455)
                                               --------      --------
                                                 (9,271)      (36,467)
           Investment and other income           63,251        75,202
                                               --------      --------
                                                 53,980        38,735
         Annuities, life and health              21,981        30,123
         Other (d)                              (19,376)      (26,643)
                                               --------      --------
                                               $ 56,585      $ 42,215
                                               ========      ========

         (a)    Revenues include sales of products and services as well as
                other income earned by the respective segments.
         (b)    Represents lines in "run-off"; AFC has ceased underwriting
                new business in these operations.
         (c)    Represents primarily investment income.
         (d)    Includes holding company expenses.

D.    GOODWILL Effective January 1, 2002, goodwill is no longer amortized. If
      the $3.5 million of goodwill amortization had not been deducted in the
      first quarter of 2001, net earnings for that period would have been $20.5
      million.

E.    PAYABLE TO AMERICAN FINANCIAL GROUP AFC has a reciprocal Master Credit
      Agreement with various AFG holding companies under which these companies
      make funds available to each other for general corporate purposes.

                                       10
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


F.    LONG-TERM DEBT  The carrying value of long-term debt consisted of the
      following (in thousands):
<TABLE>
<CAPTION>
                                                                March 31,   December 31,
                                                                    2002           2001
                                                                --------    -----------
<S>                                                            <C>            <C>
            HOLDING COMPANIES:
               AFC notes payable under bank line                $225,000       $203,000
               APU 10-7/8% Subordinated Notes due May 2011        11,542         11,557
               Other                                              12,976         13,695
                                                                --------       --------

                                                                $249,518       $228,252
                                                                ========       ========
            SUBSIDIARIES:
               GAFRI 6-7/8% Senior Notes due June 2008          $100,000       $100,000
               GAFRI notes payable under bank line               121,100        121,100
               Notes payable secured by real estate               36,081         36,253
               Other                                              13,231         13,399
                                                                --------       --------

                                                                $270,412       $270,752
                                                                ========       ========
</TABLE>

      At March 31, 2002, sinking fund and other scheduled principal payments on
      debt for the balance of 2002 and the subsequent five years were as follows
      (in millions):
                          Holding
                        Companies    Subsidiaries          Total
                        ---------    ------------         ------
            2002          $234.9           $   .9         $235.8
            2003             -                1.2            1.2
            2004             -              122.4          122.4
            2005             -               10.4           10.4
            2006             -               19.1           19.1
            2007              .1               .6             .7

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

      AFC and GAFRI each have an unsecured credit agreement with a group of
      banks under which they can borrow up to $300 million and $155 million,
      respectively. Borrowings bear interest at floating rates based on prime or
      Eurodollar rates. Loans mature in December 2002 under the AFC credit
      agreement and in December 2004 under the GAFRI credit agreement.
<PAGE>
G.    MINORITY INTEREST  Minority interest in AFC's balance sheet is comprised
      of the following (in thousands):
                                                       March 31,    December 31,
                                                           2002            2001
                                                       --------     -----------
        Interest of AFG (parent) and noncontrolling
          shareholders in subsidiaries' common stock   $312,108        $317,824
        Preferred securities issued by
          subsidiary trusts                             142,913         142,913
                                                       --------        --------
                                                       $455,021        $460,737
                                                       ========        ========

                                       11
<PAGE>
                      AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

      The preferred securities consisted of the following (in thousands):
<TABLE>
<CAPTION>

      Date of                                          March 31,   December 31,    Optional
      Issuance            Issue (Maturity Date)            2002           2001     Redemption Dates
      -------------       ------------------------     --------    -----------     --------------------
<S>                      <C>                           <C>            <C>         <C>
      November 1996       GAFRI 9-1/4% TOPrS (2026)     $72,913        $72,913     Currently redeemable
      March 1997          GAFRI 8-7/8% Pfd   (2027)      70,000         70,000     On or after 3/1/2007
</TABLE>

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

                                                             Three months ended
                                                                  March 31,
                                                             -------------------
                                                                 2002       2001
                                                                 ----       ----
          Interest of AFG (parent) and noncontrolling
            shareholders in earnings of subsidiaries           $5,479     $4,005
          Effect of basis difference in realized gains
            (losses) of subsidiaries                           (2,517)       -
          Accrued distributions by subsidiaries
            on trust issued preferred securities, net of tax    2,106      2,914
                                                               ------     ------
                                                               $5,068     $6,919
                                                               ======     ======

H.    SHAREHOLDERS' EQUITY  At March 31, 2002, and December 31, 2001, American
      Financial Group beneficially owned all of the outstanding shares of AFC's
      Common Stock.

      PREFERRED STOCK Under provisions of both the Nonvoting (4.0 million shares
      authorized) and Voting (4.0 million shares authorized) Cumulative
      Preferred Stock, the Board of Directors may divide the authorized stock
      into series and set specific terms and conditions of each series. At March
      31, 2002, and December 31, 2001, the outstanding voting shares of AFC's
      Preferred Stock consisted of the following:

              SERIES J, no par value; $25.00 liquidating value per share; annual
              dividends per share $2.00; redeemable at AFC's option at $25.75
              per share beginning December 2005 declining to $25.00 at December
              2007 and thereafter; 2,886,161 shares (stated value $72.2 million)
              outstanding at March 31, 2002, and December 31, 2001.
<PAGE>
      The change in unrealized gain on marketable securities for the three
      months ended March 31 included the following (in millions):
<TABLE>
<CAPTION>
                                                                          Minority
                                                     Pretax      Taxes    Interest       Net
                                                     ------      -----    --------      -----
<S>                                                <C>         <C>        <C>        <C>
                      2002
      ---------------------------------------
      Unrealized holding losses on securities
        arising during the period                   ($125.1)     $43.6      $12.9      ($68.6)
      Realized losses included in net income           17.8       (6.2)      (3.9)        7.7
                                                     ------      -----      -----       -----
      Change in unrealized gain on marketable
        securities, net                             ($107.3)     $37.4      $ 9.0      ($60.9)
                                                     ======      =====      =====       =====

                     2001
      ---------------------------------------
      Unrealized holding gains on securities
        arising during the period                    $ 59.0     ($20.6)     ($8.2)      $30.2
      Realized losses included in net income            6.9       (2.4)       (.3)        4.2
                                                     ------      -----       ----       -----
      Change in unrealized gain on marketable
        securities, net                              $ 65.9     ($23.0)     ($8.5)      $34.4
                                                     ======      =====       ====       =====
</TABLE>
                                       12
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


I.    EQUITY IN LOSSES OF INVESTEES Since 1998, AFC subsidiaries have made loans
      to two start-up manufacturing businesses which were previously owned by
      unrelated third-parties. During 2000, the former owners chose to forfeit
      their equity interests to AFC rather than invest additional capital.

      During the fourth quarter of 2000, AFC sold the equity interests to a
      group of employees for nominal cash consideration plus warrants to
      repurchase a significant ownership interest. Due to the absence of
      significant financial investment by the buyers relative to the amount of
      loans ($61.5 million at December 31, 2000) owed to AFC subsidiaries, the
      sale was not recognized as a divestiture for accounting purposes. Assets
      of the businesses transferred ($56.1 million at March 31, 2002 and $57.1
      million at December 31, 2001) are included in other assets; liabilities of
      the businesses transferred ($11.7 million at March 31, 2002 and $11.8
      million at December 31, 2001, after consolidation and elimination of loans
      from AFC subsidiaries) are included in other liabilities. Investee losses
      in the Statement of Earnings represents AFC's equity in the losses of
      these two companies. One of the businesses is involved in litigation
      impacting its operations; see "Investee Corporations" in Management's
      Discussion and Analysis.

J.    COMMITMENTS AND CONTINGENCIES There have been no significant changes to
      the matters discussed and referred to in Note M "Commitments and
      Contingencies" of AFC's Annual Report on Form 10-K for 2001.

























                                       13
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

                                     ITEM 2

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

      GENERAL

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

      IT INITIATIVE In 1999, AFC initiated an enterprise-wide project to study
      its information technology ("IT") resources, needs and opportunities. The
      initiative, involving improvements in physical infrastructure and business
      support systems, entails extensive effort and costs over a period of
      several years. While the costs precede the expected savings, management
      believes the benefits will exceed the costs incurred, all of which have
      been and will be funded through available working capital.

      FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of
      1995 provides a safe harbor for forward-looking statements. Some of the
      forward-looking statements can be identified by the use of forward-looking
      words such as "believes", "expects", "may", "will", "should", "seeks",
      "intends", "plans", "estimates", "anticipates" or the negative version of
      those words or other comparable terminology. Examples of such
      forward-looking statements include statements relating to: expectations
      concerning market and other conditions and their effect on future
      premiums, revenues, earnings and investment activities; expected losses
      and the adequacy of reserves for asbestos, environmental pollution and
      mass tort claims; rate increases, improved loss experience and expected
      expense savings resulting from recent initiatives.

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

        o  changes in economic conditions, including interest rates, performance
           of securities markets, and the availability of capital;
        o  regulatory actions;
        o  changes in legal environment;
        o  tax law changes;
        o  levels of catastrophes and other major losses;
        o  the ultimate amount of liabilities associated with certain asbestos
           and environmental-related insurance claims;
        o  adequacy of loss reserves;
        o  availability of reinsurance and ability of reinsurers to pay their
           obligations; and
        o  competitive pressures, including the ability to obtain rate
           increases.
<PAGE>
      The forward-looking statements herein are made only as of the date of this
      report. AFC assumes no obligation to publicly update any forward-looking
      statements.

                                       14
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


      LIQUIDITY AND CAPITAL RESOURCES

      RATIOS  AFC's debt to total capital ratio at the parent holding company
      level (excluding amounts due AFG) was approximately 15% at March 31, 2002,
      and 13% at December 31, 2001. Including amounts due AFG, the ratio was 29%
      at March 31, 2002, and 28% at December 31, 2001.

      AFC's ratio of earnings to fixed charges, excluding and including
      preferred dividends, on a total enterprise basis was 3.86 and 3.57 for the
      first three months of 2002 and 1.56 and 1.45 for the entire year of 2001.

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

      AFC has a revolving credit agreement with several banks under which it can
      borrow up to $300 million until December 31, 2002. At March 31, 2002,
      three-fourths of the credit line had been used. While management expects
      to negotiate a replacement bank agreement later this year, market
      conditions indicate the maximum amount may be smaller and interest costs
      will likely be greater.

      INVESTMENTS  AFC's investment portfolio at March 31, 2002, contained $11.1
      billion in "Fixed maturities" and $320 million in "Other stocks", all
      carried at market value with unrealized gains and losses reported as a
      separate component of shareholders' equity on an after-tax basis. At March
      31, 2002, AFC had pretax net unrealized gains of $27.5 million on fixed
      maturities and $139.5 million on other stocks.

      Approximately 93% of the fixed maturities held by AFC at March 31, 2002,
      were rated "investment grade" (credit rating of AAA to BBB) by nationally
      recognized rating agencies. Investment grade securities generally bear
      lower yields and lower degrees of risk than those that are unrated and
      noninvestment grade. Management believes that a high quality investment
      portfolio is more likely to generate a stable and predictable investment
      return.

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





                                       15
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


      Summarized information for the unrealized gains and losses recorded in
      AFC's balance sheet at March 31, 2002, follows (dollars in millions):

                                                             Securities with
                                                           -------------------
                                                            Gains       Losses
                                                           ------       ------
             Fixed Maturities
             ----------------
                Market value                               $6,100       $4,600
                Gross unrealized                           $  228       $  201
                Number of security positions                1,200          600
                Number individually exceeding
                  $2 million gain or loss                       4           11
                Concentration of gains or losses by
                   type or industry (exceeding 5% of
                   unrealized):
                      Mortgage-backed securities           $ 75.2       $ 36.5
                      U.S. Treasuries                        14.2         11.0
                      Telephone communications                3.2         33.3
                      Banks                                  24.0          1.9
                      Electric services                       7.7         12.3
                      Air transportation                      1.5         11.3
                Percentage rated investment grade              96%          90%

             Other Stocks
             ------------
                Market value                                $ 264       $   19
                Gross unrealized                            $ 151       $   12
                Number individually exceeding
                  $2 million gain or loss                       3            2

      AFC's investment in equity securities of Provident Financial Group, a
      Cincinnati-based commercial banking and financial services company,
      represents $137 million of the $151 million in unrealized gains on other
      stocks at March 31, 2002.
<PAGE>
      The table below sets forth the scheduled maturities of fixed maturity
      securities (by separate gain/loss segments and in total) at March 31,
      2002, based on their market values.
                                                       Unrealized
                                                     ---------------
             Maturity                                Gains    Losses      Total
             --------                                -----    ------      -----
             One year or less                            9%        1%         6%
             After one year through five years          27        15         22
             After five years through ten years         18        40         27
             After ten years                            16        14         15
                                                       ---       ---        ---
                                                        70        70         70
             Mortgage-backed securities                 30        30         30
                                                       ---       ---        ---
                                                       100%      100%       100%
                                                       ===       ===        ===

      AFC realized aggregate losses of $5.9 million during the first three
      months of 2002 on $71.1 million in sales of fixed maturity securities (16
      issues) that had unrealized losses at December 31, 2001. Market values of
      ten of the issues improved from year-end to date of sale while the other
      six deteriorated; overall, there was a slight net improvement. Of the
      three with unrealized losses greater than $500,000 at year-end, actual
      losses on sale were $1.1 million less than the unrealized loss at
      year-end. Although AFC had the ability to continue holding these
      investments, its intent to hold them changed due to a variety of reasons
      including actual or expected deterioration in the issuer's credit and
      decisions to lessen exposure to a particular credit or industry.


                                       16
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


      The length of time securities with unrealized losses at March 31, 2002,
      have been in an unrealized loss position varies by individual security. Of
      the 96 individual securities at that date with unrealized losses exceeding
      $500,000, 78 have been in that position for less than one year, including
      68 that have been in that position for less than six months. Of the 111
      individual securities at that date with unrealized gains exceeding
      $500,000, 48 have been in that position for less than one year, including
      9 that have been in that position for less than six months.

      When a decline in the value of a specific investment is considered to be
      "other than temporary," a provision for impairment is charged to earnings
      (accounted for as a realized loss) and the cost basis of that investment
      is reduced. The determination of whether unrealized losses are "other than
      temporary" requires judgment based on subjective as well as objective
      factors. A listing of factors considered and resources used is contained
      in the discussion of "Investments" under Management's Discussion and
      Analysis in AFC's 2001 Form 10-K.

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

      UNCERTAINTIES Aside from risks common to most insurance operations,
      management believes that the areas posing the greatest risk of material
      loss are Great American's exposure to asbestos, environmental and other
      mass tort claims and American Premier's exposure to asbestos,
      environmental and other contingencies arising out of its former
      operations.

              PROPERTY AND CASUALTY INSURANCE RESERVES Future costs of claims
      are projected based on historical trends adjusted for changes in
      underwriting standards, policy provisions, product mix and other factors.
      Estimating the liability for unpaid losses and LAE is inherently
      judgmental and is influenced by factors which are subject to significant
      variation. Through the use of analytical reserve development techniques,
      management monitors items such as the effect of inflation on medical,
      hospitalization, material, repair and replacement costs, general economic
      trends and the legal environment.
<PAGE>
              ASBESTOS AND ENVIRONMENTAL-RELATED ("A&E") RESERVES Establishing
      reserves for A&E claims is subject to uncertainties that are significantly
      greater than those presented by other types of claims. Estimating ultimate
      liability for asbestos claims presents unique and difficult challenges to
      the insurance industry due to, among other things, inconsistent court
      decisions, an increase in bankruptcy filings as a result of
      asbestos-related liabilities, novel theories of coverage, and judicial
      interpretations that often expand theories of recovery and broaden the
      scope of coverage. The casualty insurance industry is engaged, as is AFC,
      in extensive litigation over these coverage and liability issues as the
      volume and severity of claims against asbestos defendants continue to
      increase.



                                       17
<PAGE>

                       AMERICAN FINANCIAL CORPORATION 10-Q

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


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

      Further, certain policyholders assert that each bodily injury claim should
      be treated as a separate occurrence under the policy, and that their
      claims are not subject to aggregate limits on coverage because either
      their policies did not contain aggregate limits with respect to products
      liability coverage or, faced with exhaustion of products coverage limits,
      their asbestos claims fall within non-products liability coverage which is
      not subject to any aggregate limit. These claims are now being contested
      in insurance coverage litigation in various jurisdictions. In rejecting
      the claims that are the basis of this litigation, AFC believes its
      coverage defenses are substantial and intends to continue to vigorously
      defend its position. Nonetheless, the outcome of this litigation is
      uncertain and such claims may have a material adverse effect upon AFC's
      future results of operations and financial condition.

      For further discussion of uncertainties and litigation involving AFC, see
      Note M "Commitments and Contingencies" to the financial statements and
      "Legal Proceedings" in AFC's Annual Report on Form 10-K for 2001.

      RESULTS OF OPERATIONS

      GENERAL Pretax operating earnings for the first quarter of 2002 were $56.6
      million compared to $42.2 million for the first quarter of 2001. First
      quarter results reflect significantly improved property and casualty
      underwriting results, partially offset by a decrease in income from the
      sale of real estate and higher realized losses.

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

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

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

                                       18
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


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

                                                         Three months ended
                                                              March 31,
                                                        --------------------
                                                          2002          2001
                                                          ----          ----
         Net Written Premiums (GAAP)
         ---------------------------
            Specialty                                   $386.7        $356.6 (a)
            Personal                                     256.4 (b)     370.5
            Other lines                                     .3           -
                                                        ------        ------
                                                        $643.4        $727.1
                                                        ======        ======

         Combined Ratios (GAAP)
         ----------------------
            Specialty                                     98.5%        100.6%
            Personal                                     102.1         108.5
            Aggregate (including discontinued lines)     101.4         105.6

            (a) Before a reduction of $29.7 million for unearned premium
                transfer related to the sale of the Japanese division.
            (b) Reflects the ceding of $88.7 million in premiums under a
                reinsurance agreement (effective April 1, 2001).

      SPECIALTY The Specialty group's increase in net written premiums reflects
      the impact of rate increases and the realization of growth opportunities
      in certain commercial markets, partially offset by the decision to
      discontinue certain lines of business (during 2001) that were not
      achieving adequate returns and by additional reinsurance agreements.
      Specialty rate increases averaged over 25% during the first quarter of
      2002 and are expected to average approximately 20% for the year. The
      Specialty group reported a solid underwriting profit for the 2002 quarter
      with a combined ratio of 98.5%. The 2.1 point improvement in the combined
      ratio compared to 2001 reflects strategic changes in the mix of specialty
      businesses and the impact of rate increases.
<PAGE>
      PERSONAL The Personal group's decline in net written premiums reflects a
      reinsurance agreement, effective April 1, 2001, under which AFC cedes 90%
      of the automobile physical damage business written by certain of its
      insurance subsidiaries. This agreement is enabling AFC to reallocate some
      of its capital to the more profitable specialty operations. Excluding the
      effect of this agreement, the Personal group's net written premiums
      declined about 7%, reflecting lower business volume partially offset by
      the impact of rate increases. Rate increases implemented in the first
      quarter of 2002 were about 4% and are expected to range between 8% and 10%
      for the year. As a result of rate increases implemented over the last
      year, the combined ratio improved by 6.4 points over the first quarter of
      2001. Management expects the Personal group to achieve underwriting
      profitability by the fourth quarter of 2002.




                                       19
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

      REAL ESTATE OPERATIONS  AFC's subsidiaries are engaged in a variety of
      real estate operations including hotels, apartments, office buildings and
      recreational facilities; they also own several parcels of land. Revenues
      and expenses of these operations, including gains and losses on disposal,
      are included in AFC's statement of earnings as shown below (in millions).

                                                       Three months ended
                                                            March 31,
                                                       ------------------
                                                         2002        2001
                                                         ----        ----
           Other income                                 $15.3       $32.0
           Other operating and general expenses          14.5        15.0
           Interest charges on borrowed money              .6          .7
           Minority interest expense, net                 -           1.9

      Other income includes net pretax gains on the sale of real estate assets
      of $171,000 in the first quarter of 2002 and $15.3 million in the first
      quarter of 2001.

      OTHER INCOME Excluding gains on sales of real estate assets (discussed
      above), other income increased $4.4 million (10%) due primarily to fees
      earned by certain new specialty insurance operations.

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

      LOSSES ON SECURITIES Realized losses on securities include provisions for
      other than temporary impairment of securities still held of $18.3 million
      in the first quarter of 2002 and $8 million in the first quarter of 2001.
      Increased impairment charges in recent years reflect a rise in corporate
      defaults in the marketplace resulting from the weakened economy.

      Warrants to purchase common stock of publicly traded companies are
      generally considered derivatives and marked to market through current
      earnings as realized gains and losses. Realized losses on securities
      include losses of $3 million in the first quarter of 2002 and $.8 million
      in the first quarter of 2001 to adjust the carrying value of AFC's
      investment in warrants to market value ($26.4 million at March 31, 2002).

      LOSS ON SUBSIDIARIES AFC recognized a $1.6 million pretax loss in
      connection with the sale of the Japanese division in 2001.

      ANNUITY BENEFITS Annuity benefits reflect amounts accrued on annuity
      policyholders' funds accumulated. The majority of GAFRI's fixed rate
      annuity products permit GAFRI to change the crediting rate at any time
      (subject to minimum interest rate guarantees of 3% or 4% per annum). As a
      result, management has been able to react to changes in market interest
      rates and maintain a desired interest rate spread.
<PAGE>
      INTEREST EXPENSE Interest expense for the first quarter of 2002 decreased
      compared to 2001 as lower average interest rates on AFC's variable rate
      debt (including AFC's payable to AFG) more than offset higher average
      indebtedness.



                                       20
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

      OTHER OPERATING AND GENERAL EXPENSES Other operating and general expenses
      for the first quarter of 2001 include goodwill amortization of $3.5
      million. Under SFAS No. 142, which was implemented January 1, 2002,
      goodwill is no longer amortized. Excluding 2001 goodwill amortization,
      other operating and general expenses increased $8.9 million (9%) due
      primarily to expenses related to certain new specialty insurance
      operations and increased amortization of annuity and life deferred
      acquisition costs.

      INCOME TAXES The 2002 provision for income taxes includes a $16 million
      tax benefit for the reversal of previously accrued amounts due to the
      resolution of certain tax matters.

      INVESTEE CORPORATIONS Equity in losses of investee corporations represents
      losses of two start-up manufacturing businesses (see Note I). In November
      2001, an injunction was issued against one of the companies which would
      prohibit the company from using equipment subject to litigation alleging
      the misappropriation of a trade secret and effectively close the plant.
      The injunction was subsequently modified, pending appeal, to permit
      operations to continue and require certain escrow payments. If the
      investee is unsuccessful in its attempt to have the injunction lifted or
      further modified, or if operating results fail to improve, a substantial
      portion of AFC's investment ($32.4 million as of March 31, 2002), may be
      written off.


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

                                     ITEM 3

             QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
             ------------------------------------------------------

      As of March 31, 2002, there were no material changes to the information
      provided in AFC's Form 10-K for 2001 under the caption "Exposure to Market
      Risk" in Management's Discussion and Analysis of Financial Condition and
      Results of Operations.















                                       21
<PAGE>

                       AMERICAN FINANCIAL CORPORATION 10-Q
                                     PART II
                                OTHER INFORMATION


                                     ITEM 6

                        EXHIBITS AND REPORTS ON FORM 8-K
                        --------------------------------


(a) Exhibit 10 - 2002 Annual Bonus Plan

(b) Reports on Form 8-K:  none





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



                                    SIGNATURE
                                    ---------

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

                                     American Financial Corporation




May 13, 2002                         BY:   Fred J. Runk
                                           -----------------------------------
                                           Fred J. Runk
                                           Senior Vice President and Treasurer

















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