<PAGE>   1





                       SECURITIES AND EXCHANGE COMMISSION

                            Washington, D. C.  20549

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

                                   Form 10-Q



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

                  For the Quarterly Period Ended June 30, 1997
                                       or
      [ ]            Transition Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934


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


                         Commission File Number 0-8636


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


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



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


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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X  No 
                                              ----    ----

As of August 11, 1997, 1,962,410 shares of registrant's common stock, $3.33 1/3
par value, were outstanding.
<PAGE>   2
                    AMERICAN INDEMNITY FINANCIAL CORPORATION
                                AND SUBSIDIARIES

ITEM 1.  FINANCIAL STATEMENTS

                 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
                    SIX MONTHS ENDED JUNE 30, 1997 AND 1996
                                   UNAUDITED

<TABLE>
<CAPTION>
                                                           1997              1996
                                                       ------------      ------------
<S>                                                    <C>               <C>         
PREMIUMS AND OTHER INCOME:
Premiums earned                                        $ 31,680,749      $ 33,640,505
Net investment income (net of investment
  expenses of $197,377 in 1997 and $194,060
  in 1996)                                                2,166,028         2,231,850
Realized investment gains                                   294,523           223,825
Interest on premium bills receivable and other
  income                                                    376,110           356,094
                                                       ------------      ------------
                               TOTAL                     34,517,410        36,452,274
                                                       ------------      ------------

EXPENSES:
Losses and loss adjustment expenses                      22,906,778        24,116,966
Policy acquisition costs                                 11,882,024        12,457,801
Retrospective premium adjustments on workers'
  compensation policies                                    (250,265)          (21,308)
                                                       ------------      ------------
                               TOTAL                     34,538,537        36,553,459
                                                       ------------      ------------

LOSS BEFORE FEDERAL INCOME TAX                              (21,127)         (101,185)

CREDIT FOR FEDERAL INCOME TAX:
Current                                                      (3,201)
Deferred                                                   (147,000)
                                                       ------------      ------------
                               TOTAL                       (150,201)
                                                       ------------      ------------

INCOME (LOSS)                                          $    129,074      $   (101,185)
                                                       ============      ============

AVERAGE SHARES OUTSTANDING                                1,960,910         1,947,539

EARNINGS PER SHARE:
NET INCOME (LOSS)                                      $       0.07      $      (0.05)
                                                       ============      ============

DIVIDENDS DECLARED PER SHARE                           $       0.15      $       0.15
                                                       ============      ============
</TABLE>


                See Notes to Consolidated Financial Information
<PAGE>   3

                    AMERICAN INDEMNITY FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
                   THREE MONTHS ENDED JUNE 30, 1997 AND 1996
                                   UNAUDITED

<TABLE>
<CAPTION>
                                                            1997              1996
                                                       ------------      ------------
<S>                                                    <C>               <C>         
PREMIUMS AND OTHER INCOME:
Premiums earned                                        $ 15,736,393      $ 16,765,029
Net investment income (net of investment
  expenses of $94,195 in 1997 and $94,543
  in 1996)                                                1,100,207         1,112,231
Realized investment gains                                   270,919            86,911
Interest on premium bills receivable and other
  income                                                    162,310           183,800
                                                       ------------      ------------
                               TOTAL                     17,269,829        18,147,971
                                                       ------------      ------------

EXPENSES:
Losses and loss adjustment expenses                      11,342,255        13,206,607
Policy acquisition costs                                  5,747,734         6,109,427
Retrospective premium adjustments on workers'
  compensation policies                                    (123,866)           (1,079)
                                                       ------------      ------------
                               TOTAL                     16,966,123        19,314,955
                                                       ------------      ------------

INCOME (LOSS) BEFORE FEDERAL INCOME TAX                     303,706        (1,166,984)

CREDIT FOR FEDERAL INCOME TAX:
Current                                                      (3,201)
Deferred                                                    (81,000)
                                                       ------------      ------------
                               TOTAL                        (84,201)
                                                       ------------      ------------

INCOME (LOSS)                                          $    387,907      $ (1,166,984)
                                                       ============      ============

AVERAGE SHARES OUTSTANDING                                1,962,410         1,947,860

EARNINGS PER SHARE:
NET INCOME (LOSS)                                      $       0.20      $      (0.60)
                                                       ============      ============

DIVIDENDS DECLARED PER SHARE                           $      0.075      $      0.075
                                                       ============      ============
</TABLE>


                See Notes to Consolidated Financial Information
<PAGE>   4

                    AMERICAN INDEMNITY FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                      JUNE 30, 1997 AND DECEMBER 31, 1996
                                   UNAUDITED

<TABLE>
<CAPTION>
                                                            1997             1996
                                                        ------------     ------------
<S>                                                     <C>              <C>         
ASSETS

Investments:
  Fixed maturities - bonds:
    Available for sale                                  $ 69,290,376     $ 72,110,261
  Preferred stocks                                           996,238        1,377,438
  Common stocks                                           14,906,302       12,420,256
  Mortgage loans on real estate                               17,074           19,710

                                                        ------------     ------------
            Total Investments                             85,209,990       85,927,665
Cash and Cash Equivalents                                  6,212,372        4,349,953
Accrued Investment Income                                    735,201          826,791
Premiums in Course of Collection                           7,296,547        4,093,476
Direct Premium Bills Receivable                           11,679,882        9,659,722
Reinsurance Balances Receivable                           18,504,525       18,689,412
Prepaid Reinsurance Premiums                                 613,373          651,050
Property and Equipment - less accumulated deprecia-
  tion of $5,232,706 in 1997 and $4,838,388 in 1996        4,004,067        4,072,394
Deferred Policy Acquisition Costs                          9,522,063        9,375,133
Deferred Income Taxes                                      4,890,000        4,743,000
Other Assets                                               3,172,842        2,511,152
                                                        ============     ============
            TOTAL                                       $151,840,862     $144,899,748
                                                        ============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Losses and Loss Adjustment Expenses                     $ 54,545,239     $ 55,601,929
Unearned Premiums                                         36,887,899       36,325,073
Reinsurance Balances Held or Payable                       4,145,641        1,657,874
Notes Payable to Bank                                        475,137          515,981
Accounts Payable and Other Accrued Liabilities            12,323,957        9,179,918
                                                        ------------     ------------
            Total Liabilities                            108,377,873      103,280,775
                                                        ------------     ------------

Stockholders' Equity:
  Preferred stock, authorized 2,000,000 shares;
    none outstanding
  Common stock, $3.33 1/3 par value; authorized
    2,500,000 shares; outstanding shares 1,962,410
    in 1997 and 1,948,110 in 1996                          6,541,351        6,506,351
  Paid-in surplus                                         13,097,668       13,061,709
  Unrealized appreciation in market value
    of investments                                         4,018,733        2,080,388
  Retained earnings                                       19,805,237       19,970,525
                                                        ------------     ------------

            Total Stockholders' Equity                    43,462,989       41,618,973
                                                        ------------     ------------

            TOTAL                                       $151,840,862     $144,899,748
                                                        ============     ============
</TABLE>

                See Notes to Consolidated Financial Information
<PAGE>   5

                    AMERICAN INDEMNITY FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
                    SIX MONTHS ENDED JUNE 30, 1997 AND 1996
                                   UNAUDITED

<TABLE>
<CAPTION>
                                                            1997              1996
                                                         -----------      -----------
OPERATING ACTIVITIES:

<S>                                                      <C>               <C>        
  Net Income (loss)                                      $   129,074       $ (101,185)
  Adjustments to reconcile net income (loss)
    to net cash flow from operating activities:
    Decrease (Increase) in:
      Premiums in course of collection                    (3,203,071)      (2,695,108)
      Direct premium bills receivable                     (2,020,160)      (1,751,897)
      Reinsurance balances receivable                        184,887         (799,456)
      Prepaid reinsurance premiums                            37,677           89,718
      Deferred policy acquisition costs                     (146,930)        (710,267)
      Deferred income taxes                                 (147,000)
      Other assets                                          (661,690)        (264,876)
    Increase (Decrease) in:
      Unpaid losses and loss adjustment expenses          (1,056,690)         288,772
      Unearned premiums                                      562,826        2,777,941
      Reinsurance balances held or payable                 2,487,767          139,123
      Accounts payable and other accrued liabilities       3,144,039          388,991
    Realized investment (gains) losses                      (294,523)        (223,825)
    Depreciation                                             228,060          224,018
    Other                                                    124,854          (71,843)
                                                         -----------      -----------

          Net cash flow from operating activities           (630,880)      (2,709,894)
                                                         -----------      -----------

INVESTING ACTIVITIES:

  Sale of bonds                                            2,712,403        5,225,745
  Maturity of bonds                                        1,376,124        4,852,820
  Sale of preferred stocks                                         0          184,396
  Redemption of preferred stocks                             405,302          467,868
  Sale of common stocks                                      631,215          975,354
  Purchase of bonds                                         (723,613)      (9,855,254)
  Purchase of common stocks                               (1,486,788)        (631,986)
  Purchase of property and equipment                        (159,733)        (195,283)
  Maturity of long-term certificates of deposit                    0           10,000
  Other                                                        2,636            2,386
                                                         -----------      -----------
          Net cash flow from investing activities          2,757,546        1,036,046
                                                         -----------      -----------

FINANCING ACTIVITIES:

  Proceeds received from bank loan                                 0          580,500
  Payments on bank loan                                      (40,844)         (25,417)
  Cash dividends paid to stockholders                       (294,362)        (292,128)
  Proceeds received from exercise of stock options            70,959            6,380
                                                         -----------      -----------
          Net cash flow from financing activities           (264,247)         269,335
                                                         -----------      -----------

          Net Increase (Decrease) in Cash and Cash
             Equivalents                                   1,862,419       (1,404,513)

          Cash and Cash Equivalents, January 1             4,349,953        4,781,566
                                                         -----------      -----------
          Cash and Cash Equivalents, June 30             $ 6,212,372      $ 3,377,053
                                                         ===========      ===========
</TABLE>

                See Notes to Consolidated Financial Information


<PAGE>   6
                    AMERICAN INDEMNITY FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL INFORMATION


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

(2)   Deferred income taxes reflect the net tax effects of (a) temporary
      differences between the carrying amounts of assets and liabilities for
      financial reporting purposes and the amounts used for income tax
      purposes, and (b) operating loss carryforwards.  The tax effects of
      significant items comprising the Company's net deferred income taxes as
      of  June 30, 1997 and December 31, 1996 are as follows:

<TABLE>
<CAPTION>
                                                  June 30, 1997      December 31, 1996
                                                  -------------      ----------------- 
      <S>                                        <C>                 <C>
      Deferred tax liabilities:                                  
      Deferred policy acquisition costs            $ (3,237,800)       $ (3,187,545)
      Differences between book and tax                           
        basis of property                              (272,361)           (320,161)
      Unrealized investment gains                    (1,366,369)           (707,332)
      Other                                            (421,245)           (341,959)
                                                   ------------        ------------ 
                                                     (5,297,476)         (4,556,997)
                                                   ------------        ------------ 
      Deferred tax assets:                                       
      Reserves not currently deductible               5,504,065           5,167,237
      Operating loss carryforwards                   12,551,858          12,189,198 
                                                   ------------        ------------ 
                                                     18,055,923          17,356,435 
                                                   ------------        ------------ 
      Net Asset                                      12,758,447          12,799,438
      Valuation allowance                            (7,868,447)         (8,056,438)
                                                   ------------        ------------ 
      Net deferred tax assets                      $  4,890,000        $  4,743,000  
                                                   ============        ============
</TABLE>


      The credit for income tax for the six months ended June 30, 1997 was
      $150,201.  The Company did not pay any federal income taxes during the
      first six months of 1997 or the first six months of 1996.

      The Company has a net operating loss carryforward for tax purposes of
      $36,917,230, which expires if not previously utilized, in 1998-
      $3,163,998; 1999-$7,384,546; 2000-$5,712,421; 2001-$4,927,522;
      2002-$2,271,256; 2003-$621,205; 2004-$4,596,950; 2005- $1,246,728;
      2006-$118,137; 2007-$43,352; 2008-$13,450; 2009-$13,410; 2010-$4,604,277;
      2011 - $1,133,330; and 2012 - $1,066,648.
<PAGE>   7
(3)   The Company paid total interest expense of $21,836 and $16,370 for the
      six months ended June 30, 1997 and June 30, 1996, respectively.

(4)   In February 1997, the Financial Accounting Standards Board issued
      Statement No. 128, "Earnings Per Share," ("SFAS No. 128").  SFAS No. 128,
      which is effective for periods ending after December 15, 1997,
      establishes standards for computing and presenting earnings per share
      ("EPS").  SFAS No. 128 replaces the presentation of primary EPS
      previously prescribed by Accounting Principles Board Opinion No. 15 ("APB
      No. 15") with a presentation of basic EPS, which is computed by dividing
      income available to common stockholders by the weighted-average number of
      common shares outstanding for the period.  SFAS No. 128 also requires
      dual presentation of basic and diluted EPS.  Diluted EPS is computed
      similar to fully diluted EPS pursuant to APB No. 15.  Pro forma basic and
      diluted EPS for all historical periods presented, assuming that SFAS No.
      128 was effective at the beginning of each such historical period, would
      not be materially different from what has been presented using APB No.
      15. Also in February 1997, the FASB issued SFAS No. 129, "Disclosure of
      Information about Capital Structure", which establishes standards for
      disclosing information about an entity's capital structure.  Such SFAS is
      effective for periods ending after December 15, 1997.  The Company
      believes that its disclosures already comply with the requirements of
      SFAS No. 129.

(5)   In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
      Income", and SFAS No. 131, "Disclosures About Segments of an Enterprise
      and Related Information".  SFAS No. 130 establishes standards for
      reporting and displaying of comprehensive income and its components.
      SFAS No. 131 establishes standards for the way that public business
      enterprises report information about operating segments and related
      information in interim and annual financial statements.  SFAS Nos. 130
      and 131 are effective for periods beginning after December 15, 1997.
      Management is evaluating what, if any, additional disclosures may be
      required upon the implementation of SFAS Nos. 130 and 131.
<PAGE>   8
                    AMERICAN INDEMNITY FINANCIAL CORPORATION
                                AND SUBSIDIARIES

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


LIQUIDITY

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

    OPERATING ACTIVITIES

         The net cash flow from operating activities for the six months ended
June 30, 1997 was negative primarily as a result of unfavorable underwriting
results in the commercial automobile line of business during the first six
months of 1997.  The unfavorable underwriting results for the commercial
automobile line of business were due primarily to the occurrence of several
large liability claims in the period.  Management believes that these claims
are not indicative of a trend.

         The net cash flow from operating activities for the six months ended
June 30, 1996 was negative primarily as a result of unfavorable underwriting
results.  The underwriting results during the first six months of 1996 were
caused primarily by the occurrence of several weather-related natural
catastrophes and unfavorable underwriting results for the automobile and
commercial multiple peril lines of business.

    INVESTING ACTIVITIES

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

         During the first six months of 1997, unrealized investment gains
increased stockholders' equity by approximately $1,938,000, of which
approximately $590,000 of this amount was from debt securities, with the
remaining gains from equity securities.  These unrealized investment gains were
primarily the result of overall favorable investment market conditions during
the first six months of 1997.

         The $590,000 unrealized investment gains on debt securities included
approximately $648,000 unrealized investment gains related to six derivative
issues purchased by the Company in 1993.  On June 30, 1997, the value carried
in the Company's balance sheet for these six issues was approximately
$19,367,000.  The Company's debt and equity securities are reported on the
Company's balance sheet at their respective market values which fluctuate based
upon a variety of market factors.  Such fluctuations will result in changes to
the Company's unrealized investment gains or losses and will have a
corresponding impact on the Company's stockholders' equity.  The derivative
securities previously
<PAGE>   9
mentioned are known as inverse floaters as their yields, which are adjusted
periodically, vary inversely to certain LIBOR rates.  These derivative
securities will probably exacerbate swings in unrealized investment gains and
losses and stockholders' equity in the event of significant movement in
interest rates, particularly LIBOR rates.  Additionally, the yield formulas for
these securities will result in commensurate swings in investment income.  At
current yield rates and considering future yield resets for these securities
and the guarantee (see discussion below) that was obtained with respect to
certain of these securities, net investment income during the final two
quarters of 1997 earned by these securities should not change significantly
compared to the corresponding period in 1996.  This is subject to change,
either positively or negatively, depending on future investment market
conditions.

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

         In connection with an arbitration proceeding in 1995, the Company
received an agreement, effective December 8, 1995, guaranteeing the yield rate
on the largest derivative issue held by it (Guaranteed Yield Security).  The
Guaranteed Yield Security has a par value of $11,000,000 and matures in March
1998.  The yield rate that is guaranteed will equal the weekly average yield
rate for three month treasury bills during each interest period of the
security.  The maximum amount guaranteed is $1,500,000 and the guarantee will
terminate no later than the security's maturity date.  As of June 30, 1997, the
remaining amount guaranteed, reduced by settlements received, is approximately
$835,000.  This guarantee was originally secured by two letters of credit.  One
letter of credit is in the amount of $500,000 and expires two years from its
issue date.  The second letter of credit in the amount of $500,000 expired in
December 1996.  At June 30, 1997, the stated interest rate for the Guaranteed
Yield Security was .063% and the guaranteed yield rate was 5.17%.  Based on
such guaranteed yield rate, and assuming no change in the yield rate that
determines the guaranteed yield rate, net investment income earned by this
security during the final two quarters of 1997 should not change significantly
compared with the corresponding period in 1996.

         As a result of this guarantee, the yield of the Guaranteed Yield
Security is similar to that of a floating rate instrument whose coupon yield
resets weekly to the average three month treasury bill yield rate during each
interest period.  The market value of this security at June 30, 1997 was
determined based upon the market values of other securities with similar yield
resets and similar maturities.  As a result, the market value for this security
as carried on the Company's balance sheet as of June 30, 1997 was approximately
$10,989,000.

         During the first six months of 1996, management invested a portion of
available cash balances and the proceeds received from the disposition of
investments into investment grade bonds and common stocks.  The net cash flow
from investing activities was positive in the first six months of 1996 as total
investment sales and maturities  exceeded total investment purchases.
<PAGE>   10
    FINANCING ACTIVITIES

         There were no new financing commitments entered into in the first six
months of 1997 and no significant increase in the cost of current financing
arrangements.  The net cash flow from financing activities was negative for the
first six months of 1997 as a result of cash dividends paid to stockholders.
During the first six months of 1997, the Company received approximately $71,000
in proceeds from the exercise of incentive stock options, whereas, during the
first six months of 1996 the Company received approximately $6,000 in proceeds
from the exercise of incentive stock options.

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

CAPITAL RESOURCES

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

RESULTS OF OPERATIONS

         Premiums earned decreased 6.1% and 5.8%, respectively,  for the three
months and six months ended June 30, 1997 compared with the corresponding 1996
periods.  Net premiums written decreased 13.7% and 11.6 %, respectively,  for
the three months and six months ended June 30, 1997 compared with the same 1996
periods.  These decreases are primarily the result of experience based premium
increases due reinsurors charged to the Company under the retrospective premium
adjustment provisions of its casualty reinsurance contract.

         As previously discussed, the Company raised additional funds through
the sale of investments to offset the negative cash flow from unfavorable
operating results during the first six months of 1997.  These sales resulted in
a decrease in invested assets: however, this decrease was largely offset by
unrealized gains in market value of investments experienced during the first
six months of 1997, resulting in an insignificant decrease in average invested
assets of approximately $24,000 at June 30, 1997 compared with June 30, 1996.
Additionally, net investment income decreased 1.1% and 3.0% , respectively, for
the three months and six months ended June 30, 1997 compared with the same 1996
periods, primarily as a result of the sale of invested assets.  This decrease
in net investment income reduced the Company's average investment yield to
5.06% for the six months ended June 30, 1997 compared with 5.22% for the six
months ended June 30, 1996.
<PAGE>   11
         The loss and loss adjustment expense ratio was 72.1% for the three
months ended June 30, 1997 compared with 78.7% for the three months ended June
30, 1996 and was 72.3% for the six months ended June 30, 1997 compared with
71.7% for the six months ended June 1996.  The cost of weather-related natural
catastrophes was significantly less in the first two quarters of 1997 compared
with 1996; however, the underwriting results of the commercial automobile line
of business were unfavorable for the same comparison periods. Weather-related
natural catastrophes cost the company approximately $309,000 and $546,000,
respectively, for the three months and six months ended June 30, 1997, compared
with $1,651,000 and $2,514,000, respectively for the three months and six
months ended June 30, 1996.   The unfavorable underwriting results for the
commercial automobile line of business during  1997 were due primarily to the
occurrence of several large liability claims in the period.

         The policy acquisition cost ratio was 36.5% for the three months ended
June 30, 1997 compared with 36. 4% for the three months ended June 30, 1996 and
was 37.5% for the six months ended June 30, 1997, compared with 37.0% for the
six months ended June 30, 1996.

         Net income for the Company was approximately $388,000 for the three
months ended June 30, 1997 compared with a net loss of $1,167,000 for the three
months ended June 30, 1996.  The Company had net income of approximately
$129,000 for the six months ended  June 30,1997, compared with a net loss of
$101,000 for the six months ended June 30, 1996. This turnaround is primarily a
result of the decrease in weather related natural catastrophes during the first
six months of 1997 compared with the first six months of 1996,  which resulted
in fewer claims and more than offset the decrease in premiums earned and the
increase in commercial automobile claims.

FORWARD-LOOKING STATEMENTS

         Certain statements made herein and in other public filings and
releases by the Company contain "forward-looking" information (as defined in
the Private Securities Litigation Reform Act of 1995) that involve risk and
uncertainty.  These forward-looking statements may include, but are not limited
to, future revenues, earnings, margins, costs, market trends in the insurance
industry, inflation and various economic and business trends.  Although the
Company believes that the expectations reflected in such forward looking
statements are based upon reasonable assumptions, the Company can give no
assurance that these expectations will be achieved.  Actual results and trends
in the future may differ materially depending on a variety of factors
including, but not limited to, domestic economic activity and inflation, the
Company's successful execution of internal operating plans and the factors that
are disclosed in conjunction with the forward looking statements included
herein and in other public filings and releases by the Company.
<PAGE>   12
                    AMERICAN INDEMNITY FINANCIAL CORPORATION
                                AND SUBSIDIARIES


Item 4.            Submission of Matters to a Vote of Security Holders

      (a)  Election of Class III Directors

                 At the annual meeting of the stockholders of the Company held
                 April 24, 1997, the Company's stockholders elected three Class
                 III directors to serve on the Board of Directors of the
                 Company for the ensuing three years.  The following table sets
                 forth the number of votes cast for each nominee for director,
                 the number of votes cast against or withheld from voting with
                 respect to each nominee and the number of votes represented by
                 shares which abstained from voting with respect to each
                 nominee for director:

<TABLE>
<CAPTION>
                             Votes             Votes
                                               -----
      Nominee               Cast For      Against/Withheld      Abstensions
      -------               --------      ----------------      -----------
<S>                        <C>                  <C>                <C>
Fred C. Burns              1,717,598            3,400              2,895
Harris L. Kempner          1,720,798              200              2,895
William C. Levin, M.D.     1,719,698            1,300              2,895
</TABLE>

                 There were no broker non-votes.

             (b) At the Company's annual meeting of stockholders held April 24,
                 1997, the stockholders approved and adopted the 1997 Non-
                 Employee Director Stock Option Plan.  1,676,403 votes were
                 cast in favor of the Non-Employee Director Stock Option Plan,
                 29,687 votes were cast against and 16,865 abstained.



Item 6.      (a) Exhibit 11 -     Computation of Fully Diluted Net Income per
                                  Common and Common Equivalent Share.

                 Exhibit 27 -     Financial Data Schedule.

             (b) Reports on Form 8-K

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



                                   SIGNATURES

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



                                  AMERICAN INDEMNITY FINANCIAL CORPORATION
                                  ----------------------------------------
                                                (Registrant)


Date    AUGUST 13, 1997                         
     ------------------------      ---------------------------------------
                                                PHILLIP E. APGAR
                                      VICE PRESIDENT-TREASURER - CHIEF
                                             FINANCIAL OFFICER
                                 (PRINCIPAL FINANCIAL & ACCOUNTING OFFICER)
<PAGE>   13
                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO.                    DESCRIPTION
<S>                 <C>
Exhibit 11 -        Computation of Fully Diluted Net Income per Common and
                    Common Equivalent Share.

Exhibit 27 -        Financial Data Schedule.
</TABLE>