-------------------------------------------------------------------------------
                       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
June 30, 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 August 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 26
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<PAGE>


                       AMERICAN FINANCIAL CORPORATION 10-Q
                                     PART I
                              FINANCIAL INFORMATION

                 AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                             (Dollars In Thousands)
<TABLE>
<CAPTION>
                                                                  June 30,    December 31,
                                                                     2002            2001
                                                              -----------     -----------
<S>                                                        <C>             <C>

ASSETS:
   Cash and short-term investments                            $   444,299     $   543,644
   Investments:
     Fixed maturities - at market
       (amortized cost - $11,159,709 and $10,593,205)          11,429,209      10,748,605
     Other stocks - at market
       (cost - $182,049 and $187,810)                             323,749         313,710
     Policy loans                                                 214,928         211,288
     Real estate and other investments                            255,922         262,801
                                                              -----------     -----------
         Total investments                                     12,223,808      11,536,404

   Recoverables from reinsurers and prepaid
     reinsurance premiums                                       2,545,203       2,286,509
   Agents' balances and premiums receivable                       774,730         666,171
   Deferred acquisition costs                                     886,281         818,323
   Other receivables                                              337,520         254,137
   Variable annuity assets (separate accounts)                    518,546         529,590
   Prepaid expenses, deferred charges and other assets            465,966         451,362
   Goodwill                                                       312,594         312,134
                                                              -----------     -----------

                                                              $18,508,947     $17,398,274
                                                              ===========     ===========
<PAGE>
LIABILITIES AND CAPITAL:
   Unpaid losses and loss adjustment expenses                 $ 4,943,957     $ 4,777,580
   Unearned premiums                                            1,814,249       1,640,955
   Annuity benefits accumulated                                 6,051,718       5,832,120
   Life, accident and health reserves                             912,087         638,522
   Payable to American Financial Group, Inc.                      328,011         356,689
   Long-term debt:
     Holding companies                                            241,776         228,252
     Subsidiaries                                                 270,134         270,752
   Variable annuity liabilities (separate accounts)               518,546         529,590
   Accounts payable, accrued expenses and other
     liabilities                                                1,339,907       1,185,146
                                                              -----------     -----------
         Total liabilities                                     16,420,385      15,459,606

   Minority interest                                              476,397         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                                              986,625         984,125
     Retained earnings                                            314,761         255,127
     Unrealized gain on marketable securities, net                229,000         156,900
                                                              -----------     -----------
         Total shareholders' equity                             1,612,165       1,477,931
                                                              -----------     -----------

                                                              $18,508,947     $17,398,274
                                                              ===========     ===========
</TABLE>




                                        2
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

                 AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENT OF EARNINGS
                                 (In Thousands)
<TABLE>
<CAPTION>
                                                 Three months ended           Six months ended
                                                      June 30,                     June 30,
                                                --------------------      -------------------------
<S>                                          <C>          <C>          <C>            <C>

                                                    2002        2001            2002           2001
                                                    ----        ----            ----           ----
INCOME:
    Property and casualty insurance
      premiums                                  $618,935    $679,563      $1,222,843     $1,324,286
    Life, accident and health premiums            72,709      70,533         143,644        139,691
    Investment income                            213,518     214,374         434,477        424,164
    Realized losses on:
      Securities                                 (47,490)    (26,425)        (65,290)       (33,306)
      Subsidiaries                                  -           -               -            (1,586)
    Other income                                  62,405      56,915         110,017        115,207
                                                --------    --------      ----------     ----------
                                                 920,077     994,960       1,845,691      1,968,456

COSTS AND EXPENSES:
    Property and casualty insurance:
      Losses and loss adjustment expenses        459,037     526,411         901,950      1,022,627
      Commissions and other underwriting
        expenses                                 166,689     192,902         336,955        377,876
    Annuity benefits                              71,016      70,716         146,541        139,980
    Life, accident and health benefits            59,392      52,211         115,312        106,294
    Interest charges on borrowed money            11,554      14,777          22,648         33,650
    Other operating and general expenses         121,600     114,505         234,911        222,376
                                                --------    --------      ----------     ----------
                                                 889,288     971,522       1,758,317      1,902,803
                                                --------    --------      ----------     ----------

Operating earnings before income taxes            30,789      23,438          87,374         65,653
Provision for income taxes                         5,685       4,347           8,388         19,299
                                                --------    --------      ----------     ----------

Net operating earnings                            25,104      19,091          78,986         46,354

Minority interest expense, net of tax             (6,311)     (4,188)        (11,379)       (11,107)
Equity in net losses of
    investees, net of tax                         (2,353)     (2,313)         (5,087)        (5,647)
                                                --------    --------      ----------     ----------
Earnings before cumulative effect
    of accounting change                          16,440      12,590          62,520         29,600
Cumulative effect of accounting change              -        (10,040)           -           (10,040)
                                                --------    --------      ----------     ----------

NET EARNINGS                                    $ 16,440    $  2,550      $   62,520     $   19,560
                                                ========    ========      ==========     ==========
</TABLE>

                                        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                             -              -         62,520         -             62,520
  Change in unrealized                     -              -           -          72,100          72,100
                                                                                             ----------
    Comprehensive income                                                                        134,620

  Capital contribution from parent         -             3,067        -            -              3,067
  Dividends on Preferred Stock             -              -         (2,886)        -             (2,886)
  Other                                    -              (567)       -            -               (567)
                                        -------       --------    --------     --------      ----------

BALANCE AT JUNE 30, 2002                $72,154       $996,250    $314,761     $229,000      $1,612,165
                                        =======       ========    ========     ========      ==========


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

  Net earnings                             -              -         19,560         -             19,560
  Change in unrealized                     -              -           -          25,740          25,740
                                                                                             ----------
    Comprehensive income                                                                         45,300

  Capital contribution from parent         -             6,134        -            -              6,134
  Dividends on Preferred Stock             -              -         (2,886)        -             (2,886)
  Other                                    -                (9)       -            -                 (9)
                                        -------       --------    --------     --------      ----------

BALANCE AT JUNE 30, 2001                $72,154       $990,516    $275,045     $164,940      $1,502,655
                                        =======       ========    ========     ========      ==========
</TABLE>















                                        4
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

                 AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (In Thousands)
<TABLE>
<CAPTION>
                                                                  Six months ended
                                                                      June 30,
                                                               -----------------------
<S>                                                         <C>           <C>
                                                                     2002         2001
                                                                     ----         ----
OPERATING ACTIVITIES:
    Net earnings                                               $   62,520     $ 19,560
    Adjustments:
      Cumulative effect of accounting change                         -          10,040
      Equity in net losses of investees                             5,087        5,647
      Depreciation and amortization                                92,899       71,503
      Annuity benefits                                            146,541      139,980
      Realized losses on investing activities                      57,539       10,167
      Deferred annuity and life policy acquisition costs          (80,775)     (73,530)
      Increase in reinsurance and other receivables              (355,340)     (77,612)
      Increase in other assets                                    (41,250)     (26,742)
      Increase in insurance claims and reserves                   375,850      169,679
      Increase in other liabilities                                99,369       74,352
      Increase in minority interest                                 7,160        4,770
      Other, net                                                   (1,651)       1,521
                                                               ----------     --------
                                                                  367,949      329,335
                                                               ----------     --------
INVESTING ACTIVITIES:
    Purchases of and additional investments in:
      Fixed maturity investments                               (2,484,455)    (981,049)
      Equity securities                                           (10,562)      (2,907)
      Subsidiary                                                  (48,500)        -
      Real estate, property and equipment                         (29,689)     (31,090)
    Maturities and redemptions of fixed maturity
      investments                                                 827,153      337,280
    Sales of:
      Fixed maturity investments                                1,168,341      368,003
      Equity securities                                            18,109        9,148
      Subsidiaries                                                   -          22,000
      Real estate, property and equipment                          10,559       43,456
    Cash and short-term investments of acquired
      (former) subsidiaries, net                                    4,642     (132,858)
    Decrease (increase) in other investments                       12,989         (171)
                                                               ----------     --------
                                                                 (531,413)    (368,188)
                                                               ----------     --------
<PAGE>
FINANCING ACTIVITIES:
    Fixed annuity receipts                                        361,223      271,827
    Annuity surrenders, benefits and withdrawals                 (278,496)    (341,310)
    Net transfers to variable annuity assets                       (2,855)      (1,368)
    Additional long-term borrowings                                59,000       78,868
    Reductions of long-term debt                                  (46,434)     (83,192)
    Borrowings from AFG                                             7,400        7,600
    Payments to AFG                                               (37,500)     (53,500)
    Capital contribution                                            4,667        9,334
    Cash dividends paid                                            (2,886)      (2,886)
                                                               ----------     --------
                                                                   64,119     (114,627)
                                                               ----------     --------

NET DECREASE IN CASH AND SHORT-TERM INVESTMENTS                   (99,345)    (153,480)

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

Cash and short-term investments at end of period               $  444,299     $283,783
                                                               ==========     ========
</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
      payments and adjusted to reflect actual payments.

      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. Establishing reserves for asbestos and
      environmental claims involves considerably more judgment than other types
      of claims 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.

      Loss reserve 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.

                                        7
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


            ANNUITY BENEFITS ACCUMULATED Annuity receipts and benefit payments
      are recorded as increases or decreases in "annuity benefits accumulated"
      rather than as revenue and expense. Increases in this liability for
      interest credited are charged to expense and decreases for surrender
      charges are credited to other income.

            LIFE, ACCIDENT AND HEALTH RESERVES Liabilities for future policy
      benefits under traditional 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 On June 28, 2002, GAFRI acquired
      Manhattan National Life Insurance Company ("MNL") from Conseco, Inc. for
      $48.5 million in cash. 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.
<TABLE>
<CAPTION>
                                                   Three months ended           Six months ended
                                                         June 30,                   June 30,
                                                 ---------------------      ------------------------
<S>                                              <C>       <C>          <C>            <C>
                                                     2002         2001            2002          2001
                                                     ----         ----            ----          ----
         REVENUES (a)
         Property and casualty insurance:
           Premiums earned:
             Specialty                           $370,286     $356,188      $  726,701    $  672,495
             Personal                             248,617      322,629         495,820       650,261
             Other lines (b)                           32          746             322         1,530
                                                 --------     --------      ----------    ----------
                                                  618,935      679,563       1,222,843     1,324,286
           Investment and other income             75,678      106,440         175,937       213,775
                                                 --------     --------      ----------    ----------
                                                  694,613      786,003       1,398,780     1,538,061
         Annuities, life and health (c)           207,620      202,562         425,042       419,592
         Other                                     17,844        6,395          21,869        10,803
                                                 --------     --------      ----------    ----------
                                                 $920,077     $994,960      $1,845,691    $1,968,456
                                                 ========     ========      ==========    ==========

         OPERATING PROFIT (LOSS)
         Property and casualty insurance:
           Underwriting:
             Specialty                           $  7,377    ($  4,609)     $   12,671   ($    6,839)
             Personal                              (2,654)     (35,795)         (7,893)      (63,577)
             Other lines (b)                      (11,514)         654         (20,840)       (5,801)
                                                 --------     --------      ----------    ----------
                                                   (6,791)     (39,750)        (16,062)      (76,217)
           Investment and other income             32,923       69,147          96,174       144,349
                                                 --------     --------      ----------    ----------
                                                   26,132       29,397          80,112        68,132
         Annuities, life and health                11,108       17,335          33,089        47,458
         Other (d)                                 (6,451)     (23,294)        (25,827)      (49,937)
                                                 --------     --------      ----------    ----------
                                                 $ 30,789     $ 23,438      $   87,374    $   65,653
                                                 ========     ========      ==========    ==========

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






                                       10
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

D.    GOODWILL  Effective January 1, 2002, goodwill is no longer amortized but
      is subject to annual impairment testing under a two step process.
      Under the first step, an entity's net assets are broken down into
      reporting units and compared to their fair value. If the carrying amount
      of a reporting unit exceeds its fair value, the second step of the
      goodwill impairment test is performed to measure the amount of impairment
      loss, if any. AFC has completed the first step of its transitional
      impairment test and has identified potential impairment of goodwill in its
      annuities and life insurance segment and the personal lines segment of its
      property and casualty insurance business. The second step of the
      impairment test, that will measure the amount of impairment loss, will be
      completed by the end of the year with any resulting impairment charge
      reported by restating first quarter 2002 results for the cumulative effect
      of a change in accounting principle. Management believes that while an
      impairment charge may be as much as 15% of the carrying value of goodwill
      at June 30, 2002, it may be as little as half of that amount.

      If the goodwill amortization of $3.4 million in the second quarter and
      $6.9 million in the first six months of 2001 had not been expensed, net
      earnings for the periods would have been $6.0 million and $26.5 million,
      respectively.

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.

F.    LONG-TERM DEBT  The carrying value of long-term debt consisted of the
      following (in thousands):
                                                          June 30,  December 31,
                                                             2002          2001
                                                         --------     ---------
        HOLDING COMPANIES:
           AFC notes payable under bank line             $218,000      $203,000
           APU 10-7/8% Subordinated Notes due May 2011     11,527        11,557
           Other                                           12,249        13,695
                                                         --------      --------

                                                         $241,776      $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            35,936        36,253
           Other                                           13,098        13,399
                                                         --------      --------

                                                         $270,134      $270,752
                                                         ========      ========
<PAGE>
      At June 30, 2002, 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         $227.2          $   .6         $227.8
            2003            -               1.2            1.2
            2004            -             122.4          122.4
            2005            -              10.4           10.4
            2006            -              19.1           19.1
            2007           79.7              .6           80.3

      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.

                                       11
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


G.    MINORITY INTEREST  Minority interest in AFC's balance sheet is
      comprised of the following (in thousands):
                                                         June 30,   December 31,
                                                            2002           2001
                                                        --------    -----------
         Interest of AFG (parent) and noncontrolling
           shareholders in subsidiaries' common stock   $333,484       $317,824
         Preferred securities issued by
           subsidiary trusts                             142,913        142,913
                                                        --------       --------
                                                        $476,397       $460,737
                                                        ========       ========

      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                                        June 30,   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):

                                                             Six months ended
                                                                 June 30,
                                                            -------------------
                                                               2002        2001
                                                               ----        ----
         Interest of AFG (parent) and noncontrolling
           shareholders in earnings of subsidiaries         $ 9,684     $ 5,128
         Effect of basis difference in realized gains
           (losses) of subsidiaries                          (2,517)        -
         Accrued distributions by subsidiaries
           on trust issued securities, net of tax             4,212       5,979
                                                            -------     -------
                                                            $11,379     $11,107
                                                            =======     =======

H.    SHAREHOLDERS' EQUITY  At June 30, 2002, and December 31, 2001, American
      Financial Group beneficially owned all of the outstanding shares of AFC's
      Common Stock.
<PAGE>
      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 June
      30, 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 June 30, 2002, and December 31, 2001.













                                       12
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


      The change in unrealized gain on marketable securities for the six months
      ended June 30 included the following (in millions):
<TABLE>
<CAPTION>
                                                                             Minority
                                                      Pretax      Taxes      Interest       Net
                                                      ------      -----      --------      -----
<S>                                               <C>         <C>          <C>          <C>
                        2002
      --------------------------------------
      Unrealized holding gains on securities
        arising during the period                     $ 57.9     ($19.9)       ($2.0)      $36.0
      Realized losses included in net income            65.3      (22.7)        (6.5)       36.1
                                                      ------      -----         ----       -----
      Change in unrealized gain on
        marketable securities, net                    $123.2     ($42.6)       ($8.5)      $72.1
                                                      ======      =====         ====       =====

                        2001
      ---------------------------------------
      Unrealized holding losses on securities
        arising during the period                    ($  3.4)     $ 1.0        ($0.8)     ($ 3.2)
      Adoption of EITF 99-20                            16.9       (6.0)        (0.9)       10.0
      Realized losses included in net income            33.3      (11.7)        (2.7)       18.9
                                                      ------      -----         ----       -----
      Change in unrealized gain on
        marketable securities, net                    $ 46.8     ($16.7)       ($4.4)      $25.7
                                                      ======      =====         ====       =====
</TABLE>

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 ($56.4 million at June 30, 2002 and $57.1
      million at December 31, 2001) are included in other assets; liabilities of
      the businesses transferred ($10.6 million at June 30, 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.
<PAGE>
J.    COMMITMENTS AND CONTINGENCIES Aside from matters disclosed in Item 1 of
      Part II to this report, 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.
<PAGE>
      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 natural catastrophes, terrorist events, incidents of war
             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.

      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 13% at June 30, 2002,
      and December 31, 2001. Including amounts due AFG, the ratio was 26% at
      June 30, 2002, and 28% at December 31, 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 June 30, 2002, just
      under 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 June 30, 2002, contained $11.4
      billion in "Fixed maturities" and $323.7 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 June
      30, 2002, AFC had pretax net unrealized gains of $269.5 million on fixed
      maturities and $141.7 million on other stocks.

      Approximately 93% of the fixed maturities held by AFC at June 30, 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 June 30, 2002, is shown in the following table
      (dollars in millions). Approximately $517 million of "Fixed maturities"
      and $46 million of "Other stocks" had no unrealized gains or losses at
      June 30, 2002.

                                                       Securities   Securities
                                                          with         with
                                                       Unrealized   Unrealized
                                                          Gains       Losses
                                                       ----------   ----------
         FIXED MATURITIES
         ----------------
           Market value of securities                      $9,052       $1,860
           Amortized cost of securities                    $8,674       $1,968
           Gross unrealized gain or loss                   $  378       $  108
           Market value as a % of amortized cost              104%          95%
           Number of security positions                     1,533          312
           Number individually exceeding
             $2 million gain or loss                            4           12
           Concentration of gains or losses by
             type or industry (exceeding 5% of
             unrealized):
                Mortgage-backed securities                 $128.6       $  8.6
                Banks                                        34.5          -
                State and municipal                          25.6          4.8
                U.S. government                              23.4           .9
                Asset-backed securities                      14.2         13.9
                Air transportation                            4.7          8.9
                Telephone communications                      3.9         19.4
                Cable television                               .2          7.9
           Percentage rated investment grade                   97%          78%

         OTHER STOCKS
         ------------
           Market value of securities                      $  257       $   21
           Cost of securities                              $  105       $   31
           Gross unrealized gain or loss                   $  152       $   10
           Market value as a % of cost                        245%          68%
           Number individually exceeding
             $2 million gain or loss                            2            1

      AFC's investment in equity securities of Provident Financial Group, a
      Cincinnati-based commercial banking and financial services company,
      represents $138 million of the $152 million in unrealized gains on other
      stocks at June 30, 2002.
<PAGE>
      The table below sets forth the scheduled maturities of fixed maturity
      securities at June 30, 2002, based on their market values.

                                                       Securities   Securities
                                                          with         with
                                                       Unrealized   Unrealized
          MATURITY                                        Gains       Losses
          --------                                     ----------   ----------
          One year or less                                  6%           1%
          After one year through five years                19           25
          After five years through ten years               24           38
          After ten years                                  15           15
                                                          ---          ---
                                                           64           79
          Mortgage-backed securities                       36           21
                                                          ---          ---
                                                          100%         100%
                                                          ===          ===

                                       16
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

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


      AFC realized aggregate losses of $11 million during the second quarter of
      2002 on $209.9 million in sales of fixed maturity securities (28 issues;
      23 issuers) that had unrealized losses at March 31, 2002. Market values of
      22 of the issues increased an aggregate of $4 million from March 31 to
      date of sale. One of the securities was a Worldcom bond that decreased in
      value by $3.3 million from March 31 to the date of sale due to the decline
      in Worldcom's financial condition. Market values of the remaining five
      securities decreased an aggregate of $1.2 million from March 31 to the
      sale date. Six of the 28 issues had unrealized losses greater than
      $500,000 at March 31. Excluding Worldcom, actual losses on sale were $1.3
      million less than the unrealized loss at March 31. Although AFC had the
      ability to continue holding these investments, its intent to hold them
      changed due primarily to deterioration in the issuer's credit, decisions
      to lessen exposure to a particular credit or industry, or to modify asset
      allocation within the portfolio.
<PAGE>
      The table below (dollars in millions) summarizes the length of time
      securities have been in an unrealized gain or loss position at June 30,
      2002.
<TABLE>
<CAPTION>
                                                                                      Market
                                                        Aggregate      Aggregate    Value as
                                                           Market     Unrealized   % of Cost
                                                            Value     Gain (Loss)      Basis
                                                        ---------     ----------   ---------
<S>                                                    <C>             <C>        <C>
      Fixed Maturities
      ---------------------------------------------
      SECURITIES WITH UNREALIZED GAINS:
        Exceeding $500,000 at 6/30/02 and for:
           Less than one year (172 issues)                 $2,192          $133        106.5%
           More than one year (51 issues)                     688            60        109.6
        Less than $500,000 at 6/30/02 (1,310 issues)        6,172           185        103.1
                                                           ------          ----
                                                           $9,052          $378        104.4
                                                           ======          ====

      SECURITIES WITH UNREALIZED LOSSES:
        Exceeding $500,000 at 6/30/02 and for:
           Less than one year (37 issues)                  $  307         ($ 47)        86.7%
           More than one year (14 issues)                     100           (31)        76.3
        Less than $500,000 at 6/30/02 (261 issues)          1,453           (30)        98.0
                                                           ------          ----
                                                           $1,860         ($108)        94.5
                                                           ======          ====
       Other Stocks
      ---------------------------------------------
      SECURITIES WITH UNREALIZED GAINS:
        Exceeding $500,000 at 6/30/02 and for:
           Less than one year (2 issues)                   $   10          $  2        125.0%
           More than one year (3 issues)                      233           147        270.9
        Less than $500,000 at 6/30/02 (57 issues)              14             3        127.3
                                                           ------          ----
                                                           $  257          $152        244.8
                                                           ======          ====
      SECURITIES WITH UNREALIZED LOSSES:
        Exceeding $500,000 at 6/30/02 and for:
           Less than one year (3 issues)                   $    4         ($  6)        40.0%
           More than one year (0 issues)                      -              -           -
        Less than $500,000 at 6/30/02 (71 issues)              17            (4)        81.0
                                                           ------          ----
                                                           $   21         ($ 10)        67.7
                                                           ======          ====
</TABLE>
      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.

                                       17
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

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


      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 As more fully explained in the following paragraphs,
      management believes that the areas posing the greatest risk of material
      loss are the adequacy of its insurance reserves and American Premier's
      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.

              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.

      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.
<PAGE>
      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 disputes related to
      asbestos and environmental matters, whether through litigation or
      negotiation, may result in liabilities exceeding current related reserves
      by amounts that

                                       18
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

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


      could have a material adverse effect upon AFC's results of operations and
      financial condition.

      For further discussion of uncertainties and litigation involving AFC, see
      "Legal Proceedings."

      RESULTS OF OPERATIONS

      GENERAL Pretax operating earnings for the second quarter and six months of
      2002 were $30.8 million and $87.4 million compared to $23.4 million and
      $65.7 million for the comparable 2001 periods. 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.

      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.















                                       19
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

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


      Premiums and combined ratios for AFC's property and casualty insurance
      subsidiaries were as follows (dollars in millions):
<TABLE>
<CAPTION>
                                                Three months ended         Six months ended
                                                     June 30,                   June 30,
                                                ------------------       ---------------------
<S>                                            <C>       <C>           <C>         <C>

                                                   2002       2001            2002        2001
                                                   ----       ----            ----        ----
           GROSS WRITTEN PREMIUMS (GAAP)
               Specialty                         $662.1     $544.1        $1,241.0    $1,030.0
               Personal                           335.9      312.9           689.5       692.9
               Other lines                          -           .1              .3          .1
                                                 ------     ------        --------    --------
                                                 $998.0     $857.1        $1,930.8    $1,723.0
                                                 ======     ======        ========    ========

           NET WRITTEN PREMIUMS (GAAP)
               Specialty                         $393.8     $393.8        $  780.5    $  750.4
               Personal                           244.9      252.0           501.3(a)    622.5
               Other lines                          -          -                .3         -
                                                 ------     ------        --------    --------
                                                 $638.7     $645.8        $1,282.1    $1,372.9
                                                 ======     ======        ========    ========

           COMBINED RATIOS (GAAP)
               Specialty                           98.0%     101.3%           98.3%      101.0%
               Personal                           101.1      111.1           101.6       109.8
               Aggregate (including
                discontinued lines)               101.1      105.9           101.4       105.7

             (a)   Reflects the ceding of $171 million in premiums in 2002
                   compared to $50 million in 2001 under a reinsurance
                   agreement (effective April 1, 2001).
</TABLE>

      SPECIALTY The Specialty group's gross written premiums for the second
      quarter and six months of 2002 increased more than 20% over the comparable
      2001 periods. These increases reflect 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. Specialty rate
      increases averaged approximately 30% during the first six months of 2002
      and are expected to average about 30% for the year. Net written premiums
      were comparable to 2001 for the second quarter and increased by 4% for the
      six months. Strong growth in gross written premiums was offset by
      increased reinsurance coverage in certain lines.
<PAGE>
      The Specialty group reported a solid underwriting profit for the six
      months and second quarter of 2002 with a combined ratio of 98.0% for the
      quarter and 98.3% for the six months. The improvement in the combined
      ratios compared to 2001 reflects strategic changes in the mix of specialty
      businesses and the impact of rate increases.

      PERSONAL The Personal group's gross written premiums for the second
      quarter increased 7% compared to the second quarter of 2001 as the impact
      of rate increases was partially offset by lower business volume. Effective
      April 1, 2001, AFC began reinsuring 80% of the automobile physical damage
      business written by three of its insurance subsidiaries. In July 2001, the
      agreement was amended to increase the level of reinsurance to 90% and to
      add an additional insurance subsidiary. This agreement enables AFC to
      reallocate some of its capital to the more profitable specialty
      operations. The decline in net written premiums for the second quarter and
      six months reflects the impact of this reinsurance agreement. Rate
      increases implemented in the first six months of 2002 were about 8% and
      are expected to be about 10% for the year.


                                       20
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

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


      As a result of rate increases implemented over the last year, the Personal
      group's combined ratio improved by 10 points for the second quarter and
      8.2 points for the six months compared to the 2001 periods. Nearly 90% of
      the Personal group's business is written through independent agents.
      Business written through this distribution channel achieved an
      underwriting profit for the third consecutive quarter with a combined
      ratio of 98.2% for second quarter of 2002. Management expects the Personal
      group as a whole to achieve underwriting profitability by the fourth
      quarter of 2002.

      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).
<TABLE>
<CAPTION>
                                                        Three months ended     Six months ended
                                                             June 30,              June 30,
                                                        ------------------     ----------------
<S>                                                    <C>        <C>        <C>       <C>
                                                           2002       2001       2002      2001
                                                           ----       ----       ----      ----
         Other income                                     $29.6      $29.4      $44.9     $61.4
         Other operating and general expenses              17.7       16.6       32.2      31.6
         Interest charges on borrowed money                  .7         .6        1.3       1.3
         Minority interest expense, net                      .5        1.4         .5       3.3
</TABLE>

      Other income includes net pretax gains on the sale of real estate assets
      of $7.5 million in the second quarter and $7.6 million in the first six
      months of 2002 compared to $9.3 million and $24.6 million for the 2001
      periods.

      OTHER INCOME Excluding gains on sales of real estate assets (discussed
      above), other income increased $7.3 million (15%) for the second quarter
      and $11.8 million (13%) for the first six months of 2002 compared to 2001
      due primarily to fees earned by the Specialty group's new warranty
      business and higher fee income in certain other 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 as follows:
      second quarter of 2002 and 2001 - $70.1 million and $29.2 million; six
      months of 2002 and 2001 -$88.4 million and $37.2 million, respectively.
      Increased impairment charges in recent years reflect a rise in corporate
      defaults in the marketplace.
<PAGE>
      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 gains of $3.7 million in the second quarter of 2002 and $660,000
      for the first six months of 2002 compared to gains of $3.2 million and
      $2.3 million in the 2001 periods to adjust the carrying value of AFC's
      investment in warrants to market value ($26.4 million at June 30, 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

                                       21
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

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


      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.

      INTEREST EXPENSE Interest expense for the second quarter and first six
      months 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.

      OTHER OPERATING AND GENERAL EXPENSES Other operating and general expenses
      for the second quarter and first six months of 2001 include goodwill
      amortization of $3.4 million and $6.9 million, respectively. 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 $10.5 million (9%) for the second quarter and
      $19.4 million (9%) for the first six months compared to 2001. Expenses of
      the Specialty group's new warranty business, higher expenses related to
      growth in certain other Specialty operations and increased amortization of
      annuity and life deferred policy acquisition costs were partially offset
      by lower IT-related expenses.

      INCOME TAXES The 2002 provision for income taxes includes a $16 million
      first quarter tax benefit for the reduction 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 G). 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 ($32.3 million as of June 30, 2002), may be
      written off.

      CUMULATIVE EFFECT OF ACCOUNTING CHANGE The cumulative effect of accounting
      change represents the implementation of a new accounting standard (EITF
      99-20) which resulted in a write down of $16.9 million ($10.0 million
      after tax and minority interest) of the carrying value of certain
      collateralized debt obligations as of April 1, 2001.

<PAGE>
           -----------------------------------------------------------


                                     ITEM 3

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


      As of June 30, 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.

                                       22
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

                                     PART II
                                OTHER INFORMATION

                                     ITEM 1

                                LEGAL PROCEEDINGS
                                -----------------


      AFC's subsidiaries are parties to litigation and receive claims asserting
      alleged injuries and damages from asbestos, environmental and other
      substances and workplace hazards and have established loss accruals for
      such potential liabilities.

      As previously reported, A.P. Green Industries, Inc. and its subsidiary,
      A.P. Green Services, Inc. (the "Policyholders") filed petitions for
      bankruptcy under Chapter 11 of the Bankruptcy Code in the United States
      Bankruptcy Court for the Western District of Pennsylvania (In re: Global
      Industrial Technologies, Inc., et al., filed February 14, 2002). Great
      American Insurance Company and certain other insurers are parties to
      litigation with the Policyholders involving liability coverage for a
      substantial number of asbestos related bodily injury claims that have been
      asserted against the Policyholders. These claims (some of which are direct
      actions against Great American) allege that the refractory materials
      manufactured, sold or installed by the Policyholders contained asbestos
      and resulted in bodily injury from exposure to asbestos. The Policyholders
      seek to recover defense and indemnity expenses related to those claims
      from a number of insurers, including Great American, and in an effort to
      maximize coverage assert that Great American's policies on various grounds
      are not subject to aggregate limits on liability, that each exposure
      alleged by a claimant constitutes a separate occurrence, and that each
      insurer is liable for all sums the Policyholders become legally obliged to
      pay. Prior to the bankruptcy filing, Great American sought to have these
      coverage issues decided as part of a contribution and declaratory judgment
      action that it brought several years earlier (Great American Insurance
      Company, et al. v. The Royal Insurance Company, et al., United States
      District Court, Southern District of Ohio, filed January 29, 1998) (the
      "District Court Action") and asked the court to declare, among other
      things, that all asbestos bodily injury claims against the Policyholders
      constitute not more than one occurrence and are subject to a $1,000,000
      aggregate limit under each of the four Great American policies at issue in
      the action and should be allocated among triggered policies and implicated
      years on a pro rata basis. Great American believes that its coverage
      defenses are substantial and intends to vigorously defend its position if
      it is unable to arrive at a mutually acceptable resolution of the claims.
      The bankruptcy filing, however, stays the District Court Action. In March
      2002, Great American and certain other insurers filed a motion in the
      Bankruptcy Court to modify the stay so as to permit the District Court
      action to proceed. During the same month, the Policyholders filed
      adversary proceedings in the Bankruptcy Court to decide the coverage
      issues.
<PAGE>
      On June 4, 2002, the Bankruptcy Court entered orders continuing
      proceedings on both the stay motion and the adversary proceeding and
      referring the insurance coverage dispute to non-binding mediation. If the
      mediation does not result in a negotiated settlement, and if the stay is
      not modified or the adversary proceedings are permitted to go forward in
      the Bankruptcy Court, then the resolution of these disputes will be
      subject to the complexities and uncertainties associated with a Chapter 11
      proceeding.

      For a further discussion of the uncertainties relative to confronting
      asbestos and environmental claims, see the following sections of AFC's
      2001 Form 10-K: Business - "Asbestos and Environmental Reserves" and Note
      M - "Commitments And Contingencies" to the Financial Statements. As a
      consequence of these uncertainties, the outcome of disputes related to
      asbestos and environmental

                                       23
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q

                                     PART II
                          OTHER INFORMATION - CONTINUED

      matters, whether through litigation or negotiation, may result in
      liabilities exceeding current related reserves by an amount that could
      have a material adverse effect on AFC's results of operations and
      financial condition.

      In March 2000, a jury in Dallas, Texas, returned a verdict against Great
      American Life Insurance Company ("GALIC") with total damages of $11.2
      million in a lawsuit brought by two former agents of GALIC (Martin v.
      Great American Life Insurance Company, 191st District Court of Dallas
      County, Texas, Case No. 96-04843). The former agents had alleged that
      their agency agreement with GALIC had been wrongfully terminated. On
      August 6, 2002, the Texas Fifth District Court of Appeals issued an
      opinion reversing the verdict in its entirety and finding that GALIC had
      no liability to the plaintiffs based on the facts of the case. The
      plaintiffs have no further appeal rights in this case.


                                     ITEM 6

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


 (a) Exhibit 99 - Certification pursuant to 18 U.S.C. section 1350, as
     adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

 (b) Reports on Form 8-K: none

























                                       24
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q



                                    SIGNATURE
                                    ---------

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

                                     American Financial Corporation




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





































                                       25
<PAGE>
                       AMERICAN FINANCIAL CORPORATION 10-Q


                                   EXHIBIT 99

      CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

           PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing with the Securities and Exchange Commission of the
Quarterly Report of American Financial Corporation (the "Company") on Form 10-Q
for the period ended June 30, 2002 (the "Report"), the undersigned officers of
the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002, that to the best of their
knowledge:

       (1)      The Report fully complies with the requirements of section 13(a)
                or 15(d) of the Securities Act of 1934; and

       (2)      The information contained in the Report fairly presents, in all
                material respects, the financial condition and results of
                operations of the Company.




August 13, 2002                      BY:   Carl H. Lindner
-------------------------                  -----------------------------------
Date                                       Carl H. Lindner
                                           Chairman of the Board and
                                             Chief Executive Officer




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



















                                       26