SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549

                             FORM 10-K

       Annual Report Pursuant to Section 13 or 15(d) of the
                  Securities Exchange Act of 1934


For the Fiscal Year Ended                           Commission File
December 31, 1997                                   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

Securities Registered Pursuant to Section 12(b) of the Act:
                                                Name of Each Exchange
   Title of Each Class                          on which Registered
   Series J Voting Cumulative Preferred Stock   Pacific
   9-3/4% Debentures due April 20, 2004         Pacific

Securities Registered Pursuant to Section 12(g) of the Act:  None

   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

   Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and need not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

   As of March 1, 1998, there were  10,593,000 shares of the
Registrant's Common Stock outstanding, all of which were owned by
American Financial Group, Inc.  At that date there were 2,886,161
shares of Series J Voting Preferred Stock outstanding (all of
which were owned by non-affiliates).  All shares of Common and
Preferred Stock are entitled to one vote per share and generally
vote as a single class.  The aggregate market value of the
Preferred Stock at that date was approximately $82.6 million.

                           _____________

               Documents Incorporated by Reference:

   Proxy Statement for the 1998 Annual Meeting of Shareholders
(portions of which are incorporated by reference into Part III
hereof).
<PAGE>
                  AMERICAN FINANCIAL CORPORATION

                      INDEX TO ANNUAL REPORT

                           ON FORM 10-K



Part I                                                          Page
  Item  1 - Business:
            Introduction                                           1
            Property and Casualty Insurance Operations             2
            Annuity and Life Operations                           16
            Other Companies                                       20
            Investment Portfolio                                  20
            Regulation                                            22
  Item  2 - Properties                                            24
  Item  3 - Legal Proceedings                                     24
  Item  4 - Submission of Matters to a Vote of Security Holders   26


Part II
  Item  5 - Market for Registrant's Common Equity and Related
            Stockholder Matters                                   27
  Item  6 - Selected Financial Data                               27
  Item  7 - Management's Discussion and Analysis of Financial
              Condition and Results of Operations                 28
  Item 7A - Quantitative and Qualitative Disclosures About
              Market Risk                                        (a)
  Item  8 - Financial Statements and Supplementary Data           37
  Item  9 - Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure                (b)


Part III
  Item 10 - Directors and Executive Officers of the Registrant    37
  Item 11 - Executive Compensation                                37
  Item 12 - Security Ownership of Certain Beneficial Owners
              and Management                                      37
  Item 13 - Certain Relationships and Related Transactions        37


Part IV
  Item 14 - Exhibits, Financial Statement Schedules and
            Reports on Form 8-K                                  S-1

(a)         Not required - market capitalization on January 28,
              1997 was less than $2.5 billion.
(b)         The response to this Item is "none".


<PAGE>
Forward-Looking Statements  The Private Securities Litigation
Reform Act of 1995 encourages corporations to provide investors
with information about the company's anticipated performance and
provides protection from liability if future results are not the
same as management's expectations.  This document contains certain
forward-looking statements that are based on assumptions which
management believes are reasonable, but by their nature,
inherently uncertain.  Future results could differ materially from
those projected.  Factors that could cause such differences
include, but are not limited to: changes in economic conditions,
regulatory actions, level of catastrophe losses, and competitive
pressures.  AFC undertakes no obligation to update any forward-
looking statements.
<PAGE>
                                PART I

                                ITEM 1

                               Business

Introduction

   American Financial Corporation ("AFC") was incorporated as an
Ohio corporation in 1955.  Its address is One East Fourth Street,
Cincinnati, Ohio 45202; its phone number is (513) 579-2121.  At
December 31, 1997, American Financial Group, Inc. ("AFG") owned
all of the outstanding Common Stock of AFC (see "Mergers" below).

   AFC is a holding company which, through its subsidiaries, is
engaged primarily in specialty and multi-line property and
casualty insurance businesses and in the sale of tax-deferred
annuities and certain life and health insurance products.  AFC's
property and casualty operations originated in 1872 and were the
20th largest property and casualty group in the United States
based on 1996 statutory net premiums written of $2.8 billion.

Mergers/Capital Contribution

    On April 3, 1995, AFC merged with a subsidiary of AFG, a new
company formed to own 100% of the common stock of both AFC and
American Premier Underwriters, Inc. ("American Premier" or "APU").
In the transaction, Carl H. Lindner and members of his family, who
owned 100% of the Common Stock of AFC, exchanged their AFC Common
Stock for approximately 55% of AFG voting common stock.  Former
shareholders of American Premier, including AFC and its
subsidiaries, received shares of AFG stock on a one-for-one basis.
AFC receives dividends paid on AFG common stock; however, its
shares generally will not be eligible to be voted as long as AFC
is owned by AFG.  No gain or loss was recorded on the exchange of
shares.  AFC continues to be a separate SEC reporting company with
publicly traded debentures and preferred stock.

   At the close of business on December 31, 1996, AFG contributed
to AFC 81% of the common stock of American Premier.  Since AFC and
American Premier were under the common control of AFG, the
acquisition of American Premier has been recorded by AFC at AFG's
historical cost in a manner similar to a pooling of interests.
Accordingly, the historical consolidated financial statements of
AFC for periods subsequent to the April 1995 Mergers have been
restated to include the accounts of American Premier.
<PAGE>
General

   Generally, companies have been included in AFC's consolidated
financial statements when AFC's ownership of voting securities has
exceeded 50%; for investments below that level but above 20%, AFC
has accounted for the investments as investees. (See Note F to
AFC's financial statements.)  The following table shows AFC's
percentage ownership of voting securities of its significant
affiliates over the past several years:

                                  Voting Ownership at December 31,
                                    1997  1996   1995  1994  1993
  American Premier Underwriters      81%   81%    (a)   42%   41%
  Great American Insurance Group    100%  100%   100%  100%  100%
  American Annuity Group             81%   81%    81%   80%   80%
  American Financial Enterprises     80%   83%    83%   83%   83%
  Chiquita Brands International      39%   43%    44%   46%   46%
  Citicasters                         -    (b)    38%   37%   20%

  (a) Exchanged for shares of American Financial Group in April 1995.
  (b) Sold in September 1996.

                                  1
<PAGE>
   The following summarizes the more significant changes in
ownership percentages shown in the above table.

   American Premier Underwriters  In April 1995, APU became a
subsidiary of AFG as a result of the Mergers.  At the close of
business on December 31, 1996, AFG contributed to AFC 81% of the
Common stock of American Premier.

   Chiquita Brands International  During the second half of 1997,
Chiquita issued an aggregate of 4.6 million shares of its common
stock in connection with the purchase of new businesses.

   Citicasters  In 1994, AFEI purchased approximately 10% of
Citicasters common stock.  In the second half of 1994,
Citicasters repurchased and retired approximately 21% of its
common stock.  In September 1996, the investments in Citicasters
were sold to an unaffiliated company.

Property and Casualty Insurance Operations

   AFC manages and operates its property and casualty business in
three major business segments: Nonstandard Automobile Insurance,
Specialty Lines and Commercial and Personal Lines.  Each segment
is comprised of multiple business units which operate
autonomously but with strong central financial controls and full
accountability.  Decentralized control allows each unit the
autonomy necessary to respond to local and specialty market
conditions while capitalizing on the efficiencies of centralized
investment, actuarial, financial and legal support functions.
AFC's property and casualty insurance operations employ
approximately 8,100 persons.

   AFC operates in a highly competitive industry that is affected
by many factors which can cause significant fluctuations in its
results of operations. The property and casualty insurance
industry has historically been subject to pricing cycles
characterized by periods of intense competition and lower premium
rates (a "downcycle") followed by periods of reduced competition,
reduced underwriting capacity due to lower policyholders' surplus
and higher premium rates (an "upcycle").  The property and
casualty insurance industry is currently in an extended
downcycle, which has lasted nearly a decade.  AFC's premiums have
been adversely affected by this downcycle, particularly in the
extremely competitive pricing environment in certain standard
commercial lines of business.

   The primary objective of AFC's property and casualty insurance
operations is to achieve underwriting profitability.
Underwriting profitability is measured by the combined ratio
which is a sum of the ratios of underwriting losses, loss
adjustment expenses ("LAE"), 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.
<PAGE>
   Management's focus on underwriting performance has resulted in
a statutory combined ratio averaging 101.3% for the period 1993
to 1997, as compared to 105.8% for the property and casualty
industry over the same period (Source: "Best's Review/Preview -
Property/Casualty" - January 1998 Edition).  AFC believes that
its product line diversification and underwriting discipline have
contributed to the Company's ability to consistently outperform
the industry's underwriting results.  Management's philosophy is
to refrain from writing business that is not expected to produce
an underwriting profit even if it is necessary to limit premium
growth to do so.
                                  2
<PAGE>
Generally, while financial data is reported on a statutory basis for
insurance regulatory purposes, it is reported in accordance with
generally accepted accounting principles ("GAAP") for shareholder
and other investment purposes.  In general, statutory accounting
results in lower capital surplus and net earnings than result
from application of GAAP.  Major differences include charging
policy acquisition costs to expense as incurred rather than
spreading the costs over the periods covered by the policies;
recording bonds and redeemable preferred stocks primarily at
amortized cost; netting of reinsurance recoverables and prepaid
reinsurance premiums against the corresponding liability;
requiring additional loss reserves; and charging to
surplus certain assets, such as furniture and fixtures and
agents' balances over 90 days old.  Unless indicated otherwise,
the financial information presented for the property and casualty
insurance operations herein is presented based on GAAP and
includes the insurance operations of AFC and American Premier for
all periods.

   The following table shows (in millions) certain information of
AFC's property and casualty insurance operations.

                                  1997       1996      1995
  Statutory Basis
  Premiums Earned               $2,802     $2,821    $3,006
  Admitted Assets                6,983      6,603     6,753
  Unearned Premiums              1,133      1,104     1,160
  Loss and LAE Reserves          3,475      3,397     3,394
  Capital and Surplus            1,916      1,659     1,595

  GAAP Basis
  Premiums Earned               $2,824     $2,845    $3,031
  Total Assets                   9,212      8,623     9,002
  Unearned Premiums              1,329      1,248     1,294
  Loss and LAE Reserves          4,225      4,124     4,097
  Shareholder's Equity           3,019      2,695     2,893
<PAGE>
   The following table shows the size (in millions), segment and
A.M. Best rating of AFC's major property and casualty insurance
subsidiaries.  AFC continues to focus on growth opportunities in
what it believes to be more profitable specialty lines and
nonstandard auto businesses which represented the bulk of 1997
net written premiums.

                                             1997 Net Written Premiums
                                           NSA                Commercial
  Company (A.M. Best Rating)             Group   Specialty  and Personal

  Great American (A)                    $   -      $  724      $507

  Republic Indemnity (A)                    -         224        -
  Mid-Continent (A)                         -         104        -
  American Empire Surplus Lines (A+)        -          23        -

  Atlanta Casualty (A)                     399         -         -
  Windsor (A)                              339         -         -
  Infinity (A)                             331         -         -
  Leader National (A-)                      59         -         -
  Transport (A)                             93         -         -
  Other                                     27         28        -
                                        $1,248     $1,103      $507

                                  3
<PAGE>
   The following table shows the performance of AFC's property
and casualty insurance operations (dollars in millions):

                                          1997       1996      1995

  Net written premiums                  $2,858     $2,788    $3,092

  Net earned premiums                   $2,824     $2,845    $3,031
  Loss and LAE                           2,076      2,132     2,265
  Underwriting expenses                    783        780       792
  Policyholder dividends                     7         14         8
  Underwriting loss                    ($   42)   ($   81)  ($   34)

  GAAP ratios:
    Loss and LAE ratio                    73.5%      75.0%     74.8%
    Underwriting expense ratio            27.7       27.4      26.1
    Policyholder dividend ratio             .2         .5        .3
    Combined ratio (a)                   101.4%     102.9%    101.2%

  Statutory ratios:
    Loss and LAE ratio                    73.4%      74.8%     74.8%
    Underwriting expense ratio            27.3       27.2      25.9
    Policyholder dividend ratio             .7         .4       1.7
    Combined ratio (a)                   101.4%     102.4%    102.4%

  Industry statutory combined ratio (b)  101.6%     105.8%    106.5%

  (a) The 1996 combined ratios include an increase of 2.8 percentage
      points attributable to the strengthening of insurance reserves
      relating to asbestos and other environmental matters ("A&E").

  (b) Ratios are derived from "BestWeek" (March 16, 1998 Edition).

   As with other property and casualty insurers, AFC's operating
results can be adversely affected by unpredictable catastrophe
losses.  Certain natural disasters (hurricanes, tornadoes,
floods, forest fires, etc.) and other incidents of major loss
(explosions, civil disorder, fires, etc.) are classified as
catastrophes by industry associations.  Losses from these
incidents are usually tracked separately from other business of
insurers because of their sizable effects on overall operations.
AFC generally seeks to reduce its exposure to such events through
individual risk selection and the purchase of reinsurance.  Major
catastrophes in recent years included Hurricane Fran in 1996 and
the Texas hailstorms in 1995.  Total net losses to AFC's
insurance operations from catastrophes were $20 million in 1997;
$85 million in 1996; and $70 million in 1995.  These amounts are
included in the tables herein.


                                  4
<PAGE>
Nonstandard Automobile Insurance

      General  The Nonstandard Automobile Insurance segment ("NSA
Group") underwrites primarily private passenger automobile
liability and physical damage insurance policies for
"nonstandard" risks.  Nonstandard insureds are those individuals
who are unable to obtain insurance through standard market
carriers due to factors such as age, record of prior accidents,
driving violations, particular occupation or type of vehicle.
Premium rates for nonstandard risks are generally higher than for
standard risks.  Total private passenger automobile insurance net
premiums written by insurance carriers in the United States in
1997 have been estimated by A.M. Best to be approximately
$115 billion.  Because it can be viewed as a residual market, the
size of the nonstandard private passenger automobile insurance
market changes with the insurance environment and grows when
standard coverage becomes more restrictive.  When this occurs,
the criteria which differentiate standard from nonstandard
insurance risks change.  The size of the voluntary nonstandard
market is also affected by rate levels adopted by state
administered involuntary plans.  According to A.M. Best, the
voluntary nonstandard market has accounted for about one-sixth of
total private passenger automobile insurance premiums written in
recent years.

   While the NSA Group's implementation of significant rate
increases during 1995 and early 1996 led to a reduction of
premiums written in 1996, it also led to improved underwriting
profitability in 1996 and 1997.  Premium growth resumed in 1997
as a result of more moderate rate activity and California's
stronger enforcement of its mandatory insurance law.

   The NSA Group writes business in 42 states and holds licenses
to write policies in 49 states and the District of Columbia.  The
U.S. geographic distribution of the NSA Group's statutory direct
written premiums in 1997 compared to 1993, was as follows:

                1997     1993                   1997    1993
  California    15.2%     6.9%     Mississippi   2.3%    3.1%
  Florida       11.1     13.2      Arizona       2.1     5.8
  Georgia       10.2     12.0      Kentucky      2.1     2.0
  Pennsylvania   8.3       *       Ohio           *      4.0
  Texas          5.9      5.6      Alabama        *      3.7
  Connecticut    5.2      3.6      Washington     *      3.3
  New York       4.3       *       Oregon         *      3.1
  Indiana        3.3      3.7      Utah           *      2.7
  Tennessee      2.7      4.5      Arkansas       *      2.5
  Missouri       2.6      3.7      Virginia       *      2.4
  Oklahoma       2.6      3.0      Other        22.1    11.2
                                               100.0%  100.0%
  _____________
  (*) less than 2%

   In addition, the NSA Group has written approximately 4% of its
net premiums annually in the United Kingdom.
<PAGE>
   Management believes that the NSA Group's underwriting success
has been due, in part, to the refinement of various risk
profiles, thereby dividing the consumer market into more defined
segments which can be underwritten or priced properly.  The NSA
Group also generally writes policies of short duration which
allow more frequent rating evaluations of individual risks,
providing management greater flexibility in the ongoing
assessment of the business.  In addition, the NSA Group has
implemented cost control measures both in the underwriting and
claims handling areas.

                                  5
<PAGE>
   The following table shows the performance of AFC's NSA Group
insurance operations (dollars in millions):

                                          1997     1996      1995

  Net written premiums                  $1,248   $1,135    $1,277

  Net earned premiums                   $1,205   $1,183    $1,246
  Loss and LAE                             898      904     1,036
  Underwriting expenses                    274      278       273
  Underwriting profit (loss)            $   33   $    1   ($   63)

  GAAP ratios:
    Loss and LAE ratio                    74.5%    76.4%     83.2%
    Underwriting expense ratio            22.7     23.5      22.0
    Combined ratio                        97.2%    99.9%    105.2%

  Statutory ratios:
    Loss and LAE ratio                    74.1%    75.8%     83.1%
    Underwriting expense ratio            21.9     22.5      21.6
    Combined ratio                        96.0%    98.3%    104.7%

  Industry statutory combined ratio (a)   98.0%   101.0%    101.3%

  (a) Represents the private passenger automobile industry statutory
      combined ratio derived from "Best's Review/Preview -
      Property/Casualty" (January 1998 Edition).  Although AFC believes
      that there is no reliable regularly published combined ratio data
      for the nonstandard automobile insurance industry, AFC believes
      that such a combined ratio would be lower than the private
      passenger automobile industry average shown above.

   Marketing  Each of the principal units in the NSA Group is
responsible for its own marketing, sales, underwriting and claims
processing.  Sales efforts are directed primarily toward
independent agents.  These units each write policies through
several thousand independent agents.

   The NSA Group had approximately one million policies in force
at December 31, 1997, just under 90% of which had policy limits
of $50,000 or less per occurrence.  Most NSA Group policies are
written for policy periods of six months or less.

   Competition  A large number of national, regional and local
insurers write nonstandard private passenger automobile insurance
coverage.  Insurers in this market generally compete on the basis
of price (including differentiation on liability limits, variety
of coverages offered and deductibles), geographic availability and
ease of enrollment and, to a lesser extent, reputation for claims
handling, financial stability and customer service.  NSA Group
management believes that sophisticated data analysis for
refinement of risk profiles has helped the NSA Group to compete
successfully.  The NSA Group attempts to provide selected pricing
for a wider spectrum of risks and with a greater variety of
payment options, deductibles and limits of liability than are
offered by many of its competitors.
                                  6
<PAGE>
Specialty Lines

   General  The Specialty Lines segment emphasizes the writing of
specialized insurance coverage where AFC personnel are experts in
particular lines of business or customer groups.  The following
are examples of such Specialty Lines and the businesses which they
operate:

    Workers' Compensation       Writes coverage for prescribed benefits
                                payable to employees (principally in
                                California) who are injured on the job.

    Executive Liability         Markets liability coverage for attorneys
                                and corporate directors and officers.

    Inand and Ocean Marine      Provides coverage primarily for marine
                                cargo, boat dealers, marina
                                operators/dealers, excursion vessels,
                                builder's risk, contractor's equipment,
                                excess property and transportation
                                cargo.

    Japanese division           Provides coverage primarily for workers'
                                compensation, commercial auto, umbrella,
                                and general liability of Japanese
                                businesses operating in the U.S.

    Agricultural-related        Provides multi-peril crop insurance
      (allied lines)            covering weather and disease perils as
                                well as coverage for full-time operating
                                farms/ranches and agribusiness operations
                                on a nationwide basis.

    Non-profit Liability        Provides property, general/professional
                                liability, automobile, trustee liability,
                                umbrella and crime coverage for a wide
                                range of non-profit organizations.

    General Aviation            Provides coverage for corporate and
                                private aircraft and airports.

    Fidelity and Surety Bonds   Provides surety coverage for various types
                                of contractors and public and private
                                corporations and fidelity and crime
                                coverage for government, mercantile and
                                financial institutions.

    Umbrella and Excess         Provides large capacity coverage in excess
                                of primary layers.

   Specialization is the key element to the underwriting success
of these business units.  Each unit has independent management
with significant operating autonomy to oversee the important
operational functions of its business such as underwriting,
pricing, marketing, policy processing and claims service.  These
specialty lines are opportunistic and their premium volume will
vary based on current market conditions.  AFC continually
evaluates expansion in existing markets and opportunities in new
specialty markets.
<PAGE>
   The U.S. geographic distribution of the Specialty Lines statutory
direct written premiums in 1997 compared to 1993, was as follows:

                    1997    1993                     1997     1993
  California        29.5%   46.7%      Oklahoma       3.5%     4.2%
  Texas              8.4     5.0       New Jersey     2.2      2.5
  Massachusetts      4.7     3.2       Pennsylvania   2.0       *
  New York           4.6     5.2       Ohio           2.0       *
  Florida            4.5     2.6       Michigan        *       2.0
  Illinois           3.7     2.9       Other         34.9     25.7
                                                    100.0%   100.0%
  _____________
  (*) less than 2%
                                  7
<PAGE>
   The following table sets forth a distribution of statutory net
written premiums for AFC's Specialty Lines by NAIC annual
statement line for 1997 compared to 1993:

                                     1997     1993
  Workers' compensation              23.5%    47.2%
  Other liability                    20.3     16.9
  Inland marine                       9.2      6.5
  Commercial multi-peril              8.4      4.7
  Auto physical damage                7.5      2.0
  General aviation                    7.2      0.1
  Allied lines                        5.8      4.5
  Fidelity and surety                 4.1      2.8
  Auto liability                      3.9      5.7
  Ocean marine                        3.6      4.2
  Other                               6.5      5.4
                                    100.0%   100.0%

   The following table shows the performance of AFC's Specialty
Lines insurance operations (dollars in millions):

                                         1997      1996      1995

  Net written premiums                 $1,103      $993    $1,097

  Net earned premiums                  $1,056      $976    $1,085
  Loss and LAE                            706       527       730
  Underwriting expenses                   344       295       302
  Policyholder dividends                   (5)        -        (3)
  Underwriting profit                  $   11      $154    $   56

  GAAP ratios:
   Loss and LAE ratio                    66.8%     53.9%     67.2%
   Underwriting expense ratio            32.6      30.2      27.9
   Policyholder dividend ratio            (.4)       -        (.3)
   Combined ratio (a)                    99.0%     84.1%     94.8%

  Statutory ratios:
   Loss and LAE ratio                     66.7%     54.1%     67.5%
   Underwriting expense ratio             31.9      30.3      28.1
   Policyholder dividend ratio             1.0        .5       4.2
   Combined ratio (a)                     99.6%     84.9%     99.8%

  Industry statutory combined ratio (b)  103.7%    108.9%    109.9%

  (a) The 1996 combined ratios reflect a reduction of 4.1 percentage
      points attributable to a reallocation of loss reserves in
      connection with the strengthening of A&E reserves.

  (b) Represents the commercial industry statutory combined ratio
      derived from "BestWeek" (March 16, 1998 Edition).

   Marketing  The Specialty Lines operations direct their sales
efforts primarily toward independent property and casualty
insurance agents and brokers.  These businesses write insurance
through several thousand agents and brokers and have nearly
290,000 policies in force.
<PAGE>
   Competition  These businesses compete with other individual
insurers, state funds and insurance groups of varying sizes, some
of which are mutual insurance companies possessing competitive
advantages in that all their profits inure to their policyholders.
Because of the specialty nature of these coverages, competition is
based primarily on service to policyholders and agents, specific
characteristics of products offered and reputation for claims
handling.  Price, commissions and profit sharing terms are also
important factors.  Management believes that sophisticated data
analysis for refinement of risk profiles, extensive specialized
knowledge and loss prevention service have helped AFC's specialty
lines compete successfully.
                                  8
<PAGE>
Commercial and Personal Lines

   General  Major commercial lines of business are workers'
compensation, commercial multi-peril, umbrella (including primary
and excess layers) and commercial auto.  The workers' compensation
business has experienced solid growth and profitability due to
adequate rate structures and favorable trends in medical care
costs and the success of its Drug-Free Workplace and SafetyWorks
programs.

   AFC's Drug-Free Workplace and SafetyWorks programs for workers'
compensation customers assist insureds in setting up drug testing
programs (as permitted by law), drug and alcohol education
programs and work safety programs.  In 1997, there were more than
1,400 insureds in 23 states with such programs producing
approximately $83 million in annual net written premiums.

   Commercial business is written in 26 states where management
believes adequate rates can be obtained and where assigned risk
costs are not excessive. AFC's approach focuses on specific
customer groups, such as fine restaurants, light manufacturers,
hotels/motels, workers' compensation safety groups and insureds
with large umbrella coverages.  The approach also emphasizes site
visits at prospective customers to ensure underwriter familiarity
with risk factors relating to each insured and to avoid those
risks which have unacceptable exposures.

   Personal lines business consists primarily of
preferred/standard private passenger automobile and homeowners'
insurance and is currently being marketed in 25 states.  AFC's
approach is to develop tailored rates for its personal automobile
customers based on a variety of factors, including the driving
record of the insureds.  The approach to homeowners business is to
limit exposure in locations which are likely to be unprofitable
and those which have significant catastrophic potential (such as
windstorms, earthquakes and hurricanes).  During 1997, AFC had a
reinsurance agreement under which 80% of its homeowners' business
was reinsured.
<PAGE>
   The U.S. geographic distribution of the Commercial and Personal Line
s statutory direct written premiums in 1997 compared to 1993, was
as follows:

                   1997    1993                    1997    1993
  Connecticut      13.1%   14.5%     Florida        2.7%    4.3%
  New Jersey       13.0     8.4      Texas          2.5     3.3
  New York         11.8     9.8      Illinois       2.3     2.8
  North Carolina   10.5     9.4      Kentucky       2.3      *
  Pennsylvania      5.6     6.0      Utah           2.1      *
  Maryland          3.9     3.9      Tennessee      2.0      *
  Ohio              3.7     4.3      California      *      3.9
  Massachusetts     3.4      *       Washington      *      2.4
  Michigan          3.4     3.5      Oregon          *      2.4
                                     Other         17.7    21.1
                                                  100.0%  100.0%
  _____________
  (*) less than 2%
                                  9
<PAGE>
   The following table sets forth a distribution of statutory net
written premiums for AFC's Commercial and Personal Lines by NAIC
annual statement line for 1997 compared to 1993:

                                 1997      1993
   Auto liability                34.6%     32.0%
   Workers' compensation         27.5      12.3
   Commercial multi-peril        19.4      19.6
   Other liability                8.1       6.2
   Auto physical damage           4.5      12.3
   Homeowners                     2.5      12.1
   Other                          3.4       5.5
                                100.0%    100.0%
<PAGE>
   The following table shows the performance of AFC's Commercial
and Personal Lines insurance operations (dollars in millions):

                                            1997    1996     1995

  Net written premiums                     $ 507   $ 660    $ 717

  Net earned premiums                      $ 563   $ 685    $ 698
  Loss and LAE                               421     538      468
  Underwriting expenses                      165     206      214
  Policyholder dividends                      11      14       11
  Underwriting profit (loss)              ($  34) ($  73)   $   5

  GAAP ratios:
   Loss and LAE ratio                       74.8%   78.5%    66.9%
   Underwriting expense ratio               29.2    30.0     30.6
   Policyholder dividend ratio               2.0     2.1      1.6
   Combined ratio (a)                      106.0%  110.6%    99.1%

  Statutory ratios:
   Loss and LAE ratio                       74.6%   78.8%    67.2%
   Underwriting expense ratio               30.2    30.4     29.9
   Policyholder dividend ratio               1.6     1.0       .6
   Combined ratio (a)                      106.4%  110.2%    97.7%

  Industry statutory combined ratio (b)    101.6%  105.8%   106.5%

  (a) The 1996 combined ratios include 3.9 percentage points (GAAP) and 3.8
      percentage points (statutory) due to losses from Hurricane Fran.

  (b) Ratios are derived from "BestWeek" (March 16, 1998 Edition).

   Marketing  The Commercial and Personal Lines business units
direct their sales efforts primarily toward independent agents and
brokers.  These businesses write insurance through more than 5,000
agents and have approximately 350,000 policies in force.

   Competition  These businesses compete with other insurers,
primarily on the basis of price (including differentiation on
policy limits, coverages offered and deductibles), agent
commissions and profit sharing terms.  Customer service, loss
prevention and reputation for claims handling are also important
factors.  Competitors include individual insurers and insurance
groups of varying sizes, some of which are mutual insurance
companies possessing competitive advantages in that all their
profits inure to their policyholders. Management believes that
sophisticated data analysis for refinement of risk profiles,
disciplined underwriting practices and aggressive loss prevention
procedures have enabled these businesses to compete on the basis
of price without negatively affecting underwriting profitability.

                                  10
<PAGE>
Reinsurance

   Consistent with standard practice of most insurance companies,
AFC reinsures a portion of its business with other reinsurance
companies and assumes a relatively small amount of business from
other insurers.  Ceding reinsurance permits diversification of
risks and limits the maximum loss arising from large or unusually
hazardous risks or catastrophic events.  The availability and cost
of reinsurance are subject to prevailing market conditions which
may affect the volume and profitability of business that is
written.  AFC is subject to credit risk with respect to its
reinsurers, as the ceding of risk to reinsurers does not relieve
AFC of its liability to its insureds.

   Reinsurance is provided on one of two bases, facultative or
treaty. Facultative reinsurance is generally provided on a risk by
risk basis.  Individual risks are ceded and assumed based on an
offer and acceptance of risk by each party to the transaction.
Treaty reinsurance provides for risks meeting prescribed criteria
to be automatically ceded and assumed according to contract
provisions.

   In order to limit the maximum loss arising out of any one
occurrence, AFC's insurance companies reinsure a portion of their
exposure under treaty and facultative reinsurance programs.  The
following table presents (by type of coverage) the amount of each
loss above the specified retention maximum generally covered by
treaty reinsurance programs (in millions):

                                    Retention    Reinsurance
   Coverage                           Maximum    Coverage(a)
   California Workers' Compensation      $1.5         $150.0
   Other Workers' Compensation            1.0           49.0
   Commercial Umbrella                    1.0           49.0
   Other Casualty                         5.0           15.0
   Property - General                     5.0           25.0(b)
   Property - Catastrophe                20.0          130.0

   (a) Reinsurance covers substantial portions of losses in excess of
       retention.
   (b) In 1997, AFC ceded 80% of its homeowners insurance coverage through
        a reinsurance agreement; beginning in 1998, it will cede 90%.

   AFC purchases facultative reinsurance providing coverage on a
risk by risk basis, both pro rata and excess of loss, depending on
the risk and available reinsurance markets.  Due in part to the
limited exposure on individual policies, the NSA Group is not
materially involved in reinsuring risks with third party insurance
companies.
<PAGE>
   Included in the balance sheet caption "recoverables from
reinsurers and prepaid reinsurance premiums" were $82 million on
paid losses and LAE and $736 million on unpaid losses and LAE at
December 31, 1997.  The collectibility of a reinsurance balance is
based upon the financial condition of a reinsurer as well as
individual claim considerations.  Market conditions over the past
few years have forced many reinsurers into financial difficulties
or liquidation proceedings.  At December 31, 1997, AFC's insurance
subsidiaries had allowances of approximately $78 million for
doubtful collection of reinsurance recoverables, substantially all
related to unpaid losses.  AFC regularly monitors the financial
strength of its reinsurers.  This process periodically results in
the transfer of risks to more financially secure reinsurers.
Substantially all reinsurance is ceded to reinsurers having more
than $100 million in capital and A.M. Best ratings of "A-" or
better.  AFC's major reinsurers include American Re-Insurance
Company, Employers Reinsurance Corporation, NAC Reinsurance
Corporation, Mitsui Marine and Fire Insurance Company, Continental
Casualty Company, Transatlantic Reinsurance Company, General
Reinsurance Corporation and Vesta Fire Insurance Company.  These
companies have assumed nearly half of AFC's ceded reinsurance.
                                  11
<PAGE>
   Premiums written for reinsurance ceded and assumed are presented
in the following table (in millions):
                                        1997   1996   1995
  Reinsurance ceded                     $614   $518   $482
  Reinsurance assumed - including
   involuntary pools and associations     89     58     98

Loss and Loss Adjustment Expense Reserves

   The consolidated financial statements include the estimated
liability for unpaid losses and LAE of AFC's insurance
subsidiaries.  This liability represents estimates of the ultimate
net cost of all unpaid losses and LAE and is determined by using
case-basis evaluations and actuarial projections.  These estimates
are subject to the effects of changes in claim amounts and
frequency and are periodically reviewed and adjusted as additional
information becomes known.  In accordance with industry practices,
such adjustments are reflected in current year operations.

   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.  Although management
believes that the reserves currently established reflect a
reasonable provision for the ultimate cost of all losses and
claims, actual development may vary materially.
<PAGE>
   AFC recognizes underwriting profit only when realization is
reasonably determinable and assured.  In certain specialty lines,
where experience is limited or where there is potential for
volatile results, AFC holds reasonable "incurred but not reported"
reserves and does not recognize underwriting profit until the
experience matures.

   Generally, reserves for reinsurance and involuntary pools and
associations are reflected in AFC's results at the amounts
reported by those entities.

   Unless otherwise indicated, the following discussion of
insurance reserves includes the reserves of American Premier's
subsidiaries for only those periods following the Mergers.  See Note Q
to the Financial Statements for an analysis of changes in AFC's estimated
liability for losses and LAE, net and gross of reinsurance, over the
past three years on a GAAP basis.

                                  12
<PAGE>
   The following table presents the development of AFC's liability
for losses and LAE, net of reinsurance, on a GAAP basis for the
last ten years, excluding reserves of American Premier
subsidiaries prior to the Mergers.  The top line of the table
shows the estimated liability (in millions) for unpaid losses and
LAE recorded at the balance sheet date for the indicated years.
The second line shows the re-estimated liability as of December 31,
1997.  The remainder of the table presents development as percentages
of the estimated liability.  The development results from additional
information and experience in subsequent years.  The middle line shows
a cumulative deficiency (redundancy) which represents the aggregate
percentage increase (decrease) in the liability initially estimated.
The lower portion of the table indicates the cumulative amounts paid
as of successive periods as a percentage of the original loss reserve
liability.
<TABLE>
<CAPTION>
                                  1987     1988     1989     1990     1991     1992     1993     1994     1995     1996     1997
<S>                            <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Liability for unpaid losses
and loss adjustment expenses:
  As originally estimated       $2,024   $2,209   $2,246   $2,137   $2,129   $2,123   $2,113   $2,187   $3,393   $3,404   $3,489
  As re-estimated at
    December 31, 1997            2,482    2,531    2,520    2,337    2,247    2,178    2,089    2,185    3,342    3,435      N/A

Liability re-estimated (*):
  One year later                 102.5%    99.8%   100.4%    98.6%    99.3%    99.9%    98.2%    95.8%    98.7%   100.9%
  Two years later                103.6%   100.0%    99.3%    97.7%    98.7%    98.3%    94.0%    99.3%    98.5%
  Three years later              103.1%    99.7%    98.4%    97.4%    98.0%    95.2%    97.4%    99.9%
  Four years later               102.5%    98.7%    98.2%    99.2%    97.3%   100.3%    98.9%
  Five years later               102.6%    99.1%   101.1%   100.0%   103.0%   102.6%
  Six years later                103.5%   103.0%   102.7%   106.3%   105.6%
  Seven years later              109.4%   104.7%   109.2%   109.4%
  Eight years later              111.7%   111.4%   112.2%
  Nine years later               119.2%   114.5%
  Ten years later                122.6%

Cumulative deficiency
  (redundancy)                    22.6%    14.5%    12.2%     9.4%     5.6%     2.6%    (1.1%)   (0.1%)   (1.5%)    0.9%     N/A

Cumulative paid as of:
  One year later                  29.2%    29.4%    32.3%    26.1%    26.4%    26.7%    25.2%    26.8%    33.1%    33.8%
  Two years later                 49.0%    48.6%    48.2%    43.2%    43.0%    43.7%    40.6%    42.5%    51.6%
  Three years later               63.5%    59.8%    59.2%    55.3%    55.4%    54.2%    50.9%    54.4%
  Four years later                72.2%    67.9%    67.6%    64.8%    63.3%    60.8%    59.1%
  Five years later                78.5%    74.0%    74.3%    71.1%    67.8%    67.0%
  Six years later                 83.6%    79.5%    78.8%    74.5%    72.7%
  Seven years later               87.7%    83.2%    81.2%    78.6%
  Eight years later               91.1%    85.2%    84.8%
  Nine years later                92.7%    88.5%
  Ten years later                 96.2%

(*)  Reflects significant A&E charges and reallocations in 1994 and 1996 for prior years losses.
</TABLE>
<PAGE>
   The following is a reconciliation of the net liability to the
gross liability for unpaid losses and LAE.
<TABLE>
<CAPTION>

                                                                                        1993     1994     1995     1996     1997
<S>                                     <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>

  As originally estimated:
    Net liability shown above                                                         $2,113   $2,187   $3,393   $3,404   $3,489
    Add reinsurance recoverables                                                         611      730      704      720      736
    Gross liability                                                                   $2,724   $2,917   $4,097   $4,124   $4,225
  As re-estimated at
  December 31, 1997:
    Net liability shown above                                                         $2,089   $2,185   $3,342   $3,435
    Add reinsurance recoverables                                                         791      782      790      748
    Gross liability                                                                   $2,880   $2,967   $4,132   $4,183      N/A


Gross cumulative deficiency
  (redundancy)                                                                           5.7%     1.8%     0.9%     1.5%     N/A
</TABLE>
                                  13
<PAGE>
   The following table presents certain data from the table above,
adjusted to include reserves of American Premier's subsidiaries for
periods subsequent to their entry into the insurance business in
1989 and prior to the Mergers in 1995.

                                 1989    1990    1991    1992    1993    1994

Liability for unpaid losses
and loss adjustment expenses:
 As originally estimated       $2,616  $2,739  $2,793  $2,886  $3,029  $3,267
 As re-estimated at
   December 31, 1997            2,831   2,873   2,848   2,824   2,871   3,138

Cumulative deficiency
  (redundancy)                    8.2%    4.9%    2.0%   (2.1%)  (5.2%)  (3.9%)

Reconciliation of net
liability to gross liability:
  As originally estimated:
    Net liability shown above                                  $3,029  $3,267
    Add reinsurance recoverables                                  617     742
    Gross liability                                            $3,646  $4,009
  As re-estimated at
  December 31, 1997:
    Net liability shown above                                  $2,871  $3,138
    Add reinsurance recoverables                                  800     766
    Gross liability                                            $3,671  $3,904

Gross cumulative deficiency
  (redundancy)                                                    0.6%   (2.6%)

   These tables do not present accident or policy year development
data.  Furthermore, in evaluating the re-estimated liability and
cumulative deficiency (redundancy), it should be noted that each
percentage includes the effects of changes in amounts for prior
periods.  For example, AFC's $80 million charge for A&E claims
related to losses recorded in 1996, but incurred before 1987, is
included in the re-estimated liability and cumulative deficiency
(redundancy) percentage for each of the previous years shown.
Conditions and trends that have affected development of the
liability in the past may not necessarily exist in the future.
Accordingly, it may not be appropriate to extrapolate future
redundancies or deficiencies based on this table.

   The adverse development in the tables is due primarily to A&E
exposures for which AFC has been held liable under general
liability policies written years ago where environmental coverage
was not intended.  Other factors affecting development included
higher than projected inflation on medical, hospitalization,
material, repair and replacement costs.  Additionally, changes in
the legal environment have influenced the development patterns over
the past ten years.  For example, changes in the California workers'
compensation law in 1993 and subsequent court decisions, primarily in
late 1996, greatly limited the ability of insurers to challenge medical
assessments and treatments.  These limitations, together with
changes in work force characteristics and medical delivery costs,
are contributing to an increase in claims severity.  Two changes
influencing development patterns in the 1980s were the trend
towards an adverse litigious climate and the change from
contributory to comparative negligence.
<PAGE>
   The differences between the liability for losses and LAE
reported in the annual statements filed with the state insurance
departments in accordance with statutory accounting principles
("SAP") and that reported in the accompanying consolidated
financial statements in accordance with GAAP at December 31, 1997,
are as follows (in millions):

  Liability reported on a SAP basis                     $3,475
   Additional discounting of GAAP reserves in excess
     of the statutory limitation for SAP reserves          (22)
   Reserves of foreign operations                           37
   Estimated salvage and subrogation recoveries
     based on a cash basis for SAP and on an accrual
     basis for GAAP                                         (1)
   Reinsurance recoverables                                736

  Liability reported on a GAAP basis                    $4,225

                                  14
<PAGE>
   Asbestos and Environmental Reserves ("A&E")  In defining
environmental exposures, the insurance industry typically includes
claims relating to polluted waste sites and asbestos as well as
other mass tort claims such as those relating to breast implants,
repetitive stress on keyboards, DES (a drug used in pregnancies
years ago alleged to cause cancer and birth defects) and other
latent injuries.

   Establishing reserves for A&E claims is subject to
uncertainties that are greater than those presented by other types
of claims.  Factors contributing to those uncertainties include a
lack of sufficiently detailed historical data, long reporting
delays, uncertainty as to the number and identity of insureds with
potential exposure, unresolved legal issues regarding policy
coverage, and the extent and timing of any such contractual
liability.  Courts have reached different and sometimes
inconsistent conclusions as to when a loss is deemed to have
occurred, what policies provide coverage, what claims are covered,
whether there is an insured obligation to defend, how policy
limits are determined and other policy provisions.  Management
believes these issues are not likely to be resolved in the near
future.

   Significant industrywide information concerning A&E reserves
first became broadly available in mid-1996 following the
publication of new data relating to that subject in the 1995
Annual Statements of insurance companies.  During 1995 and 1996, a
number of insurers recorded large reserve increases for A&E
exposures.  By the end of 1995, the industry's survival ratio
(reserves divided by annual paid losses) had increased from a
multiple of six times in the early 1990's to more than nine times.
The following table compares AFC's three-year survival ratio for
A&E claims with that of the industry.

                                        December 31,
  Survival Ratio:              1997     1996    1995    1994
     AFC                       10.0     10.5     6.5     7.0
     Industry(a)                7.6      8.2     9.4     7.9

  (a) Source: 1996-1994 "BestWeek - Property and Casualty
      Supplement" (September 15, 1997 Edition); 1997 is an
      estimate.

   Industry actions and statistics in 1995 caused AFC to re-
evaluate its position in relation to its peers as part of the
continuing process of obtaining additional information and
revising accounting estimates.  This process led management to
conclude that the A&E reserves should be increased sufficiently to
bring AFC's three-year survival ratio in line with those of the
top 50 companies.  In the third quarter of 1996, AFC strengthened
its A&E reserve to approximately 10.5 times average annual paid
losses based upon these revised industry standards for reserving
such claims.  AFC recorded a non-cash, pretax charge of
$80 million and reallocated $40 million in reserves from its
Specialty Operations.  Based on known facts, current law, and
current industry practices, management believes that its reserves
for such claims are appropriate.
<PAGE>
   The following table (in millions) is a progression of A&E
reserves.

                                        1997    1996    1995
  Reserves at beginning of year       $343.4  $225.7  $224.9
  Incurred losses and LAE               43.2   149.0    35.2
  Paid losses and LAE                  (38.7)  (31.3)  (34.4)
  Reserves at end of year, net of
    reinsurance recoverable            347.9   343.4   225.7
  Reinsurance recoverable              173.2   162.7   164.2

  Gross reserves at end of year       $521.1  $506.1  $389.9

   Since the mid-1980's, AFC has also written certain
environmental coverages (asbestos abatement and underground
storage tank liability) in which the premium charged is intended
to provide coverage for the specific environmental exposures
inherent in these policies.  The business has been profitable
since its inception.  To date, approximately $182 million of
premiums has been written, $23 million in losses and LAE have been
paid and reserves for unpaid losses and LAE aggregated $29 million
at December 31, 1997 (not included in the above table).
                                  15
<PAGE>
Annuity and Life Operations

General

   AFC's annuity operations are conducted through American Annuity
Group ("AAG"), a holding company whose primary subsidiary is Great
American Life Insurance Company ("GALIC") which it acquired from
Great American in 1992. GALIC sells (i) flexible premium and
single premium annuities in the qualified (not-for-profit) market
and (ii) single premium annuities in the non-qualified market.
AAG and its subsidiaries employ approximately 1,700 persons.

   Acquisitions in recent years have supplemented AAG's internal
growth as the company's assets increased from $4.5 billion at year
end 1992 to over $7.7 billion at year end 1997.  In addition, these
acquisitions have expanded AAG's focus from primarily traditional
fixed annuity products to three areas: (i) retirement products
(fixed and variable annuities); (ii) pre-need funding products (life
insurance and fixed annuities) and (iii) other life, accident and
health insurance.  Premiums over the last three years were as
follows (in millions):

                                               Premiums*
  Insurance Product                     1997     1996    1995
  Retirement                            $489     $540    $457
  Pre-need Funding                       111       97       -
  Other Life, Accident and Health         42       43       2
                                        $642     $680    $459
  ________________

  (*) The table does not include premiums of subsidiaries until
      their first full year following acquisition.

Retirement Products

   Annuities  AAG's retirement products consist primarily of
annuities, which are long-term retirement saving instruments that
benefit from income accruing on a tax-deferred basis.  The issuer
of the annuity collects premiums, credits interest on the policy
and pays out a benefit upon death, surrender or annuitization.

   Annuity contracts are generally classified as either fixed rate or
variable.  With a fixed rate annuity, the interest crediting rate is
initially set by the issuer and thereafter may be changed from time to
time by the issuer subject to any guaranteed minimum interest
crediting rates in the policy.  With a variable annuity, the value of
the policy is tied to an underlying securities portfolio or underlying
mutual funds.

   Employees of qualified not-for-profit organizations are
eligible to save for retirement through contributions made on a
before-tax basis.  Contributions are made at the discretion of the
participants through payroll deductions or through tax-free
"rollovers" of funds.  Federal income taxes are not payable on
contributions or earnings until amounts are withdrawn.

                                16
<PAGE>
   GALIC entered the tax-deferred annuity business in 1976 and
currently sells fixed rate annuities - both traditional and equity-
indexed.  The following table (in millions) presents financial
information concerning GALIC.

                                        1997     1996    1995
  Statutory Basis
  Total Assets                        $5,917   $5,752  $5,414
  Annuity Reserves                     5,446    5,298   4,974
  Capital and Surplus                    317      285     273
  Asset Valuation Reserve (a)             65       91      90
  Interest Maintenance Reserve (a)        24       25      32

  Annuity Receipts:
   Flexible Premium:
     First Year                       $   32   $   35  $   42
     Renewal                             160      182     196
                                         192      217     238
   Single Premium                        241      319     219
      Total Annuity Receipts          $  433   $  536  $  457
  ________________

  (a) Allocation of surplus.

  GAAP Basis
  Total Assets                        $6,223   $5,934  $5,608
  Annuity Benefits Accumulated         5,330    5,205   4,917
  Stockholder's Equity                   770      658     623

   GALIC's principal products are Flexible Premium Deferred
Annuities ("FPDAs") and Single Premium Deferred Annuities
("SPDAs").  FPDAs are characterized by premium payments that are
flexible in both amount and timing as determined by the
policyholder.  SPDAs are issued in exchange for a one-time lump-
sum premium payment.

   At December 31, 1997, all of GALIC's annuity reserves consisted
of fixed rate annuities which offered a minimum interest rate
guarantee of 3% or 4%.  The majority of GALIC's annuity policies
are traditional fixed rate annuities which permit GALIC to change
the crediting rate at any time (subject to the minimum guaranteed
interest rate).  In determining the frequency and extent of
changes in the crediting rate, GALIC takes into account the
economic environment and the relative competitive position of its
products.

   Over the last few years, traditional fixed rate annuities have
met substantial competition from mutual funds and other equity-
based investments.  In response, GALIC developed an equity-indexed
annuity which provides policyholders with a crediting rate tied,
in part, to the performance of an existing stock market index
while protecting them against the related downside risk through a
guarantee of principal.  AAG hedges the equity-based risk
component of this product through the purchase of call options on
the appropriate index.  These options are designed to offset
substantially all of the increases in the fair values of the
equity-indexed annuities.  Sales of equity-indexed annuities
accounted for 9% of GALIC's premiums in 1997.
<PAGE>
   GALIC seeks to maintain a desired spread between the yield on
its investment portfolio and the rate it credits to its policies.
GALIC accomplishes this by: (i) offering crediting rates which it
has the option to change; (ii) designing annuity products that
encourage persistency and (iii) maintaining an appropriate
matching of assets and liabilities.  GALIC designs its products
with certain surrender penalties to discourage policyholders from
surrendering or withdrawing funds during the first five to ten
years after issuance of a policy.  Partly due to these features,
GALIC's annuity surrenders have averaged approximately 7% of
statutory reserves over the past five years.

                                  17
<PAGE>
   Marketing and Distribution Sales of fixed rate annuities are
affected by many factors, including: (i) competitive annuity
products and rates; (ii) the general level of interest rates;
(iii) the favorable tax treatment of annuities; (iv) commissions
paid to agents; (v) services offered; (vi) ratings from
independent insurance rating agencies; (vii) other alternative
investments and (viii) general economic conditions.  At December
31, 1997, GALIC had more than 265,000 annuity policies in force.

   GALIC markets its FPDAs principally to employees of educational
institutions in the kindergarten through high school segment.
Written premiums from this market segment represented the majority
of GALIC's total tax-qualified premiums in 1997.

   GALIC distributes its annuity products through approximately 80
managing general agents ("MGAs") who, in turn, direct over 1,000
actively producing independent agents.  GALIC has developed its
business on the basis of its relationships with MGAs and
independent agents primarily through a consistent marketing
approach and responsive service.

   GALIC is licensed to sell its products in all states (except New
York) and in the District of Columbia.  The following table
reflects the geographical distribution of GALIC's annuity premiums
in 1997 compared to 1993.

                  1997   1993                     1997   1993
  California      21.9%  21.8%      New Jersey     3.8%   5.5%
  Texas            8.0    3.3       Michigan       3.4    8.5
  Washington       7.6    2.4       Indiana        2.9     *
  Ohio             6.4    5.5       Connecticut    2.8    5.2
  Florida          5.4    9.8       Iowa           2.5     *
  Massachusetts    5.0    8.0       Illinois       2.2    3.3
  North Carolina   4.4    3.3       Rhode Island    *     2.2
  Minnesota        3.9     *        Other         19.8   21.2
                                                 100.0% 100.0%
  _____________
  (*) less than 2%

   AAG began marketing variable annuities in the fourth quarter of
1995 through Annuity Investors Life Insurance Company ("AILIC").
With a variable annuity, the earnings credited to the policy vary
based on the investment results of the underlying investment
options chosen by the policyholder.  Policyholders may also choose
to direct all or a portion of their premiums to various fixed rate
options.  For these annuity products, all premiums directed to the
variable options are placed in funds managed by third party
investment advisers.  AILIC had variable annuity sales of
$43 million in 1997.
<PAGE>
Pre-need Funding Products

   Through American Memorial Life Insurance Company, AAG offers a
variety of life insurance and annuity products to finance pre-
arranged funerals.  In 1997, American Memorial sold its products
through over 1,200 funeral homes nationwide. In addition to a
general agency force of approximately 200 agents, American
Memorial has approximately 800 actively-producing corporate and
individual funeral home operators who sell its products.  Rapid
consolidation is making large chains an important segment of the
funeral home industry.  American Memorial is a leader in this
segment, working with several of the major corporations.  In 1997,
about one-half of American Memorial's premiums were generated by
the largest owner of funeral homes in the world.  The remaining
one-half was split between other funeral homes and the general
agency force.  As the funeral home industry continues to
consolidate, increased reliance on large funeral home operators
may be required.

   In 1997, American Memorial collected $111 million in life and
annuity premiums.  At December 31, 1997, American Memorial had total
statutory assets of approximately $468 million; reserves for future
policy benefits of approximately $424 million; and capital and
surplus of approximately $26 million.

                                  18
<PAGE>
   In March 1998, AAG acquired Arkansas National Life Insurance
Company, which also specializes in pre-arranged funeral
insurance products.  Arkansas National had statutory assets of
approximately $74 million at December 31, 1997 and 1997
premiums of $5 million.

Life, Accident and Health Products

   AAG offers a variety of life, accident and health products
through Loyal American Life Insurance Company, General Accident
Life Assurance Company of Puerto Rico, Inc. and GALIC's life
division, which began offering certain term, universal and whole
life insurance products in December 1997.  Also in 1997, Loyal
relocated its home office from Mobile, Alabama to Cincinnati, Ohio
to more closely coordinate its efforts with those of other AAG
operations.

   Loyal offers a variety of supplemental life and health
insurance products through payroll deduction plans and credit
unions.  Loyal's products are marketed with the endorsement or
consent of the employer or the credit union management.  The
products currently being offered include traditional whole life,
universal life, term life, hospital indemnity, cancer and short-
term disability.

   In 1997, Loyal collected $40 million in life and accident and
health premiums.  At December 31, 1997, Loyal had total statutory
assets of approximately $258 million; reserves for future policy
benefits of approximately $197 million; and capital and surplus of
approximately $39 million.

   In December 1997, AAG acquired General Accident which
specializes in home service life and supplemental health products
as well as credit and ordinary life products, including those
utilized in the funeral industry.  General Accident had statutory
assets of $110 million at December 31, 1997 and 1997 premiums of
$46 million (excluding premiums of certain operations sold prior to
its acquisition by AAG).  General Accident sells its in-home
service life and supplemental health products through a network of
company agents.  Its ordinary life and cancer products are sold
through independent agents.

Independent Ratings

   AAG's principal insurance subsidiaries are currently rated by
A.M. Best and Duff & Phelps.  Such ratings are generally based on
items of concern to policyholders and agents and are not directed
toward the protection of investors.

                       A.M. Best       Duff & Phelps
   GALIC               A  (Excellent)  AA-  (Very high claims paying ability)
   American Memorial   A- (Excellent)  AA-  (Very high claims paying ability)
   Loyal               A  (Excellent)  AA-  (Very high claims paying ability)
   AILIC               A  (Excellent)  Not currently rated
   General Accident    A  (Excellent)  Not currently rated

   In 1997, A.M. Best increased its ratings of American Memorial (up
two levels) and Loyal (up one level); none of the insurance
companies received a downgrade from either agency.
<PAGE>
   AAG believes that the ratings assigned by independent insurance
rating agencies are important because potential policyholders often
use a company's rating as an initial screening device in considering
annuity products.  AAG believes that a rating in the "A" category by
at least one rating agency is necessary for GALIC to successfully
market tax-deferred annuities to public education employees and
other not-for-profit groups.

   Although AAG believes that its insurance companies' ratings are
very stable, those companies' operations could be materially
adversely affected by a downgrade in ratings.

                                  19
<PAGE>
Competition

   AAG's insurance companies operate in highly competitive markets.
They compete with other insurers and financial institutions based on
many factors, including: (i) ratings; (ii) financial strength; (iii)
reputation; (iv) service to policyholders; (v) product design
(including interest rates credited and premium rates charged); (vi)
commissions; and (vii) service to agents.  Since policies are
marketed and distributed primarily through independent agents
(except at General Accident), the insurance companies must also
compete for agents.  AAG believes that consistently targeting the
same market and emphasizing service to agents and policyholders
provides a competitive advantage.

   No single insurer dominates the annuity marketplace.
Competitors include (i) individual insurers and insurance groups,
(ii) mutual funds and (iii) other financial institutions of
varying sizes.  In a broader sense, AAG's insurance companies
compete for retirement savings with a variety of financial
institutions offering a full range of financial services.
Financial institutions have demonstrated a growing interest in
marketing investment and savings products other than traditional
deposit accounts.  In addition, recent judicial and regulatory
decisions have expanded powers of financial institutions in this
regard.  It is too early to predict what impact, if any, these
developments will have on the insurance companies.

Other Companies

   Through subsidiaries, AFC is engaged in a variety of other
businesses, including The Golf Center at Kings Island (golf and
tennis facility) in the Greater Cincinnati area; commercial
real estate operations in Cincinnati (office buildings and The
Cincinnatian Hotel), Louisiana (Le Pavillon Hotel),
Massachusetts (Chatham Bars Inn), Texas (Driskill Hotel) and
apartments in Florida, Kentucky, Louisiana, Minnesota,
Pennsylvania, Texas and Wisconsin.  These operations employ
approximately 700 full-time employees.

   In December 1997, AFC sold the assets of its software
solutions and consulting services subsidiary, Millennium
Dynamics, Inc., to a subsidiary of Peritus Software Services,
Inc. for $30 million in cash and 2,175,000 shares of Peritus
common stock.
<PAGE>
Investment Portfolio

General

   A breakdown of AFC's December 31, 1997, investment portfolio by
business segment follows (excluding investment in equity
securities of investee corporations) (in millions).
                                                                      Total
                                        Carrying Value               Market
                                     P&C  Annuity  Other    Total     Value

Cash and short-term investments   $  145  $    51   $ 35  $   231   $   231
Bonds and redeemable preferred
  stocks                           4,362    6,262     29   10,653    10,735
Other stocks, options and
 warrants                            321       78     47      446       446
Loans receivable                     101      407      5      513       513 (a)
Real estate and other investments    132       58     25      215       215 (a)
                                  $5,061   $6,856   $141  $12,058   $12,140

(a)  Carrying value used since market values are not readily available.

                                  20
<PAGE>
   The following tables present the percentage distribution and yields
of AFC's investment portfolio (excluding investment in equity
securities of investee corporations) as reflected in its financial
statements.

                                         1997   1996   1995   1994   1993
Cash and Short-term Investments           1.9%   3.5%   4.0%   2.2%   2.3%
Bonds and Redeemable Preferred Stocks:
U.S. Government and Agencies              5.0    4.1    3.7    4.0    2.8
 State and Municipal                      1.3    1.0     .7     .8     .8
 Public Utilities                         6.8    8.2    9.8    9.1    9.3
 Mortgage-Backed Securities              21.4   22.3   20.9   21.8   24.7
 Corporate and Other                     50.7   49.5   47.2   48.6   42.0
 Redeemable Preferred Stocks              0.6    0.5    1.0    1.4    1.3
                                         85.8   85.6   83.3   85.7   80.9
 Net Unrealized Gains (Losses) on Bonds
   and Redeemable Preferred Stocks held
   Available for Sale                     2.5    1.1    2.7   (1.0)   1.8
                                         88.3   86.7   86.0   84.7   82.7
Other Stocks, Options and Warrants        3.7    2.9    2.3    2.7    4.6
Loans Receivable                          4.3    4.9    5.7    8.4    8.5
Real Estate and Other Investments         1.8    2.0    2.0    2.0    1.9
                                        100.0% 100.0% 100.0% 100.0% 100.0%

Yield on Fixed Income Securities:
  Excluding realized gains and losses     7.8%   7.9%   7.9%   8.1%   8.0%
  Including realized gains and losses     7.9%   7.7%   8.8%   8.1%   8.7%

Yield on Stocks:
  Excluding realized gains and losses     5.6%   5.8%   3.9%   5.1%   4.4%
  Including realized gains and losses    30.2%  15.1%   8.4%  35.4%  16.9%

Yield on Investments (*):
  Excluding realized gains and losses     7.8%   7.8%   7.9%   8.1%   7.9%
  Including realized gains and losses     8.2%   7.8%   8.8%   8.8%   9.0%

(*) Excludes "Real Estate and Other Investments".
<PAGE>
Fixed Maturity Investments

   Unlike many insurance groups which have portfolios that are
invested heavily in tax-exempt bonds, AFC's bond portfolio is
invested primarily in taxable bonds.  The NAIC assigns quality
ratings which range from Class 1 (highest quality) to Class 6
(lowest quality).  The following table shows AFC's bonds and
redeemable preferred stocks, by NAIC designation (and comparable
Standard & Poor's Corporation rating) as of December 31, 1997
(dollars in millions):

 NAIC                                  Amortized     Market Value
Rating  Comparable S&P Rating               Cost     Amount    %

 1      AAA, AA, A                       $ 6,970    $ 7,223   68%
 2      BBB                                2,624      2,714   25
           Total investment grade          9,594      9,937   93
 3      BB                                   400        417    4
 4      B                                    330        347    3
 5      CCC, CC, C                            22         34   *
 6      D                                    -          -     -
           Total non-investment grade        752        798    7
           Total                         $10,346    $10,735  100%

_______________
(*) Less than 1%

   Risks inherent in connection with fixed income securities
include loss upon default and market price volatility.  Factors
which can affect the market price of securities include:
creditworthiness, changes in interest rates, the number of market
makers and investors and defaults by major issuers of securities.

                                  21
<PAGE>
   AFC's primary investment objective for bonds and redeemable
preferred stocks is to earn interest and dividend income rather
than to realize capital gains.  AFC invests in bonds and redeemable
preferred stocks that have primarily short-term and intermediate-
term maturities.  This practice allows flexibility in reacting to
fluctuations of interest rates.

Equity Investments

   AFC's equity investment practice permits concentration of
attention on a relatively limited number of companies.  Some of
the equity investments, because of their size, may not be as
readily marketable as the typical small investment position.
Alternatively, a large equity position may be attractive to
persons seeking to control or influence the policies of a company
and AFC's concentration in a relatively small number of companies
may permit it to identify investments with above average potential
to increase in value.

   Chiquita    At December 31, 1997, AFC owned 24 million shares
of Chiquita common stock representing 39% of its outstanding
shares.  The carrying value and market value of AFC's investment
in Chiquita were approximately $201 million and $391 million,
respectively, at December 31, 1997.  Chiquita is a leading
international marketer, producer and distributor of bananas and
other quality fresh and processed food products.  In addition to
bananas, these products include other tropical fruit and fresh
produce; fruit and vegetable juices and beverages; processed
fruits and vegetables; salads; and edible oil-based consumer
products.

   Citicasters    In September 1996, AFC sold its investment in
Citicasters to Jacor Communications for approximately
$220 million in cash plus warrants to purchase Jacor common
stock.  Citicasters owned radio and television stations in major
markets throughout the country.

Regulation

   AFC's insurance company subsidiaries are subject to
regulation in the jurisdictions where they do business.  In
general, the insurance laws of the various states establish
regulatory agencies with broad administrative powers governing,
among other things, premium rates, solvency standards,
licensing of insurers, agents and brokers, trade practices,
forms of policies, maintenance of specified reserves and
capital for the protection of policyholders, deposits of
securities for the benefit of policyholders, investment
activities and relationships between insurance subsidiaries and
their parents and affiliates.  Material transactions between
insurance subsidiaries and their parents and affiliates
generally must be disclosed and prior approval of the
applicable insurance regulatory authorities generally is
required for any such transaction which may be deemed to be
material or extraordinary.  In addition, while differing from
state to state, these regulations typically restrict the
maximum amount of dividends that may be paid by an insurer to
its shareholders in any twelve-month period without advance
<PAGE>
regulatory approval.  Such limitations are generally based on
net earnings or statutory surplus.  Under applicable
restrictions, the maximum amount of dividends available to AFC
in 1998 from its insurance subsidiaries without seeking
regulatory clearance is approximately $221 million.

   Changes in state insurance laws and regulations have the
potential to materially affect the revenues and expenses of the
insurance operations.  The Company is unable to predict whether or
when laws or regulations may be adopted or enacted in such states
or what the impact of such developments would be on the future
operations and revenues of its insurance businesses in such
states.

   Prior to 1995, minimum premium rates for California workers'
compensation insurance were determined by the California
Commissioner based in part upon recommendations of the Workers'
Compensation Insurance Rating Bureau of

                                  22
<PAGE>
California.  In July 1993, California enacted legislation (the
"Reform Legislation") effecting an immediate overall 7% reduction
in workers' compensation insurance premium rates and replaced the
workers' compensation insurance minimum rate law, effective
January 1, 1995, with a procedure permitting insurers to use any
rate within 30 days after its filing with the California
Commissioner unless the rate is disapproved by the California
Commissioner.  Between December 1, 1993 and January 1, 1995, when
the "open rating" policy went into effect, the California
Commissioner ordered additional rate decreases totaling more than
25%.

   Most states have created insurance guarantee associations to
provide for the payment of claims of insurance companies that
become insolvent.  Annual assessments for AFC's insurance
companies have not been material.  In addition, many states have
created "assigned risk" plans or similar arrangements to provide
state mandated minimum levels of automobile liability coverage to
drivers whose driving records or other relevant characteristics
make it difficult for them to obtain insurance otherwise.
Automobile insurers in those states are required to provide such
coverage to a proportionate number of those drivers applying as
assigned risks.  Premium rates for assigned risk business are
established by the regulators of the particular state plan and are
frequently inadequate in relation to the risks insured, resulting
in underwriting losses.  Assigned risks accounted for
approximately one percent of AFC's net written premiums in 1997.

   The NAIC is an organization which is comprised of the chief
insurance regulator for each of the 50 states and the District of
Columbia.  In 1990, the NAIC began an accreditation program to
ensure that states have adequate procedures in place for effective
insurance regulation, especially with respect to financial
solvency.  The accreditation program requires that a state meet
specific minimum standards in over 15 regulatory areas to be
considered for accreditation.  The accreditation program is an
ongoing process and once accredited, a state must enact any new or
modified standards approved by the NAIC within two years following
adoption.  As of December 31, 1997, the District of Columbia and
48 states were accredited including states which regulate AFC's
largest insurance subsidiaries.

   The NAIC model law for Risk Based Capital applies to both
life and property and casualty companies.  The risk-based
capital formulas determine the amount of capital that an
insurance company needs to ensure that it has an acceptably low
expectation of becoming financially impaired.  The model law
provides for increasing levels of regulatory intervention as
the ratio of an insurer's total adjusted capital and surplus
decreases relative to its risk-based capital, culminating with
mandatory control of the operations of the insurer by the
domiciliary insurance department at the so-called "mandatory
control level".  At December 31, 1997, the capital ratios of
all AFC insurance companies substantially exceeded the risk-
based capital requirements.

                                  23
<PAGE>
                              ITEM 2

                            Properties

   Subsidiaries of AFC own several buildings in downtown
Cincinnati.  AFC and its affiliates occupy about three-fifths
of the aggregate 650,000 square feet of commercial and office
space.

   AFC's insurance subsidiaries lease the majority of their
office and storage facilities in numerous cities throughout the
United States, including GAI's and AAG's home offices in
Cincinnati.  Two AAG subsidiaries own office buildings in Rapid
City, South Dakota and Mobile, Alabama.  The office building in
Rapid City contains about 52,000 square feet, approximately three-
fourths of which is utilized for company purposes.  The building
in Mobile is being marketed for sale or lease; one-fifth of its
82,000 square feet is company occupied.

   AFC subsidiaries own transferable rights to develop
approximately one million square feet of floor space in the Grand
Central Terminal area in New York City.  The development rights
were derived from ownership of the land upon which the terminal
is constructed.

                              ITEM 3

                         Legal Proceedings

   AFC and its subsidiaries are involved in various litigation,
most of which arose in the ordinary course of business.  Except
for the following, management believes that none of the
litigation meets the threshold for disclosure under this Item.

   In May 1994, lawsuits were filed against American Premier by
USX Corporation ("USX") and its former subsidiary, Bessemer and
Lake Erie Railroad Company ("B&LE"), seeking contribution by
American Premier, as the successor to the railroad business
conducted by Penn Central Transportation Company ("PCTC") prior
to 1976, for all or a portion of the approximately $600 million
that USX paid in satisfaction of a judgment against B&LE for its
participation in an unlawful antitrust conspiracy among certain
railroads commencing in the 1950's and continuing through the
1970's.  The lawsuits argue that USX's liability for that payment
was attributable to PCTC's alleged activities in furtherance of
the conspiracy.  On October 13, 1994, the U.S. District Court for
the Eastern district of Pennsylvania enjoined USX and B&LE from
continuing their lawsuits against American Premier, ruling that
their claims are barred by the 1978 Consummation Order issued by
that Court in PCTC's bankruptcy reorganization proceedings.  USX
and B&LE appealed the District Court's ruling to the U.S. Court
of Appeals for the Third Circuit. On December 13, 1995, the Court
of Appeals reversed the U.S. District Court decision.  In its
opinion, the Court of Appeals only addressed American Premier's
procedural argument that the claims of USX could not proceed
because they are barred by the Consummation Order.  The Third
Circuit expressly recognized in its opinion that it was not
deciding any of American Premier's defenses on the merits.
<PAGE>
   In January 1996, American Premier filed a petition for
rehearing en banc, which requests all of the judges of the Third
Circuit to review the three-judge panel's decision.  That
petition was denied in February 1996.  In May 1996, the U.S.
Supreme Court declined to hear American Premier's petition with
respect to the bankruptcy bar issue, thereby permitting USX's
lawsuits to proceed.  American Premier and its outside counsel
believe that American Premier has substantial defenses to these
lawsuits, besides the bankruptcy bar issue, and should not suffer
a material loss as a result of this litigation.

                                  24
<PAGE>
   American Premier is a party or named as a potentially
responsible party in a number of proceedings and claims by
regulatory agencies and private parties under various
environmental protection laws, including the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA"), seeking to impose responsibility on American
Premier for hazardous waste remediation costs at certain
railroad sites formerly owned by PCTC and at certain other
sites where hazardous waste allegedly generated by PCTC's
railroad operations is present.  It is difficult to estimate
American Premier's liability for remediation costs at these
sites for a number of reasons, including the number and
financial resources of other potentially responsible parties
involved at a given site, the varying availability of evidence
by which to allocate responsibility among such parties, the
wide range of costs for possible remediation alternatives,
changing technology and the period of time over which these
matters develop. Nevertheless, American Premier believes that
its previously established loss accruals for potential pre-
reorganization environmental liabilities at such sites are
adequate to cover the probable amount of such liabilities,
based on American Premier's estimates of remediation costs and
related expenses at such sites and its estimates of the
portions of such costs that will be borne by other parties.
Such estimates are based on information currently available to
American Premier and are subject to future change as additional
information becomes available.  American Premier intends to
seek reimbursement from certain insurers for portions of
whatever remediation costs it incurs.

   In terms of potential liability to American Premier, the
company believes that the most significant such site is the
railyard at Paoli, Pennsylvania ("Paoli Yard") which PCTC
transferred to Consolidated Rail Corporation ("Conrail") in
1976.  A Record of Decision issued by the U.S. Environmental
Protection Agency in 1992 presented a final selected remedial
action for clean-up of polychlorinated biphenyls ("PCB's") at
Paoli Yard having an estimated cost of approximately
$28 million.  American Premier has accrued its portion of such
estimated clean-up costs in its financial statements (in
addition to other expenses) but has not accrued the entire
amount because it believes it is probable that other parties,
including Conrail, will be responsible for substantial
percentages of the clean-up costs by virtue of their operation
of electrified railroad cars at Paoli Yard that discharged
PCB's at higher levels than discharged by cars operated by
PCTC.

   In management's opinion, the outcome of the foregoing
environmental claims and contingencies will not, individually
or in the aggregate, have a material adverse effect on the
financial condition of American Premier.  In making this
assessment, management has taken into account previously
established loss accruals in its financial statements and
probable recoveries from third parties.

                                25
<PAGE>
                              ITEM 4

       Submission of Matters to a Vote of Security Holders

   At a Special Meeting of AFC's Shareholders on December 2, 1997,
two matters were voted upon: (Item 1) a plan of reorganization pursuant
to which all Series F and G Preferred Stock was retired in exchange for
Series J Preferred Stock and/or cash, and (Item 2) election of eleven
directors.

   With respect to Item 1, votes cast were as follows:
56,129,555 - For; 335,927 - Against; and 1,352,202 - Abstain or
Broker Non-Vote.  The votes cast for, or withheld with respect
to Item 2 are set forth below:

     Name                        For          Withheld

     Theodore H. Emmerich     57,745,234       72,450
     James E. Evans           57,745,258       72,426
     Thomas M. Hunt           57,745,234       72,450
     Carl H. Lindner          57,743,934       73,750
     Carl H. Lindner III      57,743,756       73,928
     Keith E. Lindner         57,743,756       73,928
     S. Craig Lindner         57,743,756       73,928
     William R. Martin        57,745,234       72,450
     Alfred W. Martinelli     57,745,634       72,050
     Gregory C. Thomas        57,745,658       72,026
     William W. Verity        57,745,658       72,026


                                26
<PAGE>
                             PART II

                              ITEM 5

Market for Registrant's Common Equity and Related Stockholder Matters

   Not applicable - Registrant's Common Stock is owned by
American Financial Group, Inc.  See the Consolidated Financial
Statements for information regarding dividends.

                              ITEM 6

                     Selected Financial Data

   The following table sets forth certain data for the periods
indicated (dollars in millions).

                                 1997     1996     1995     1994     1993
Earnings Statement Data:
Total Revenues                $ 4,053  $ 4,114  $ 3,628  $ 2,104  $ 2,721
Earnings Before Income Taxes
  and Extraordinary Items         334      340      252       44      262
Earnings Before Extraordinary
  Items                           208      250      195       19      225
Extraordinary Items                (7)     (28)       2      (17)      (5)
Net Earnings                      201      222      197        2      220

Ratio of Earnings to
  Fixed Charges (a)              4.20     4.99     3.10     1.69     2.62
Ratio of Earnings to
  Fixed Charges and
  Preferred Dividends (a)        3.52     3.96     2.60     1.40     2.26

Balance Sheet Data:
Total Assets                  $15,738  $14,999  $14,851  $10,593  $10,077
Long-term Debt:
  Holding Companies               287      340      648      849      771
  Subsidiaries                    194      178      234      258      283
Minority Interest                 510      307      327      106      109
Capital Subject to
  Mandatory Redemption             -        -        -         3       49
Other Capital                   1,393    1,277    1,248      396      537

(a) Fixed charges are computed on a "total enterprise" basis.
    For purposes of calculating the ratios, "earnings" have
    been computed by adding to pretax earnings the fixed
    charges and the minority interest in earnings of
    subsidiaries having fixed charges and deducting (adding)
    the undistributed equity in earnings (losses) of
    investees.  Fixed charges include interest (excluding
    interest on annuity benefits), amortization of debt
    premium/discount and expense, preferred dividend and
    distribution requirements of subsidiaries and a portion of
    rental expense deemed to be representative of the interest
    factor.

                                  27
<PAGE>
                                ITEM 7

               Management's Discussion and Analysis
         of Financial Condition and Results of Operations

GENERAL

   Following is a discussion and analysis of the financial
statements and other statistical data that management believes
will enhance the understanding of AFC's financial condition
and results of operations.  This discussion should be read in
conjunction with the financial statements beginning on page F-1.

   As discussed in Note A to the financial statements, at the
close of business on December 31, 1996, AFG contributed to AFC
81% of the common stock of American Premier.  Since AFC and
American Premier are under the common control of AFG, the
acquisition of American Premier has been recorded by AFC at
AFG's historical cost in a manner similar to a pooling of
interests.  Accordingly, the historical consolidated financial
statements of AFC for periods subsequent to the April 3, 1995
Mergers have been restated to include the accounts of American
Premier.

LIQUIDITY AND CAPITAL RESOURCES

Ratios  AFC's debt to total capital ratio at the parent
holding company level (excluding amounts due AFG) improved
from nearly 60% at the date of the Mergers to approximately
17% at December 31, 1997.  Including amounts due AFG, the
ratio was 31% at the end of 1997.

   AFC's ratio of earnings to fixed charges, excluding and
including preferred dividends, on a total enterprise basis for
the three years ended December 31, 1997, are shown below.

                                              1997    1996    1995
   Earnings to fixed charges                  4.20    4.99    3.10
   Earnings to fixed charges plus preferred
     dividends                                3.52    3.96    2.60

    The National Association of Insurance Commissioners' model
law for risk based capital ("RBC") applies to both life and
property and casualty companies.  RBC formulas determine the
amount of capital that an insurance company needs to ensure
that it has an acceptable expectation of not -becoming
financially impaired.  At December 31, 1997, the capital ratios
of all AFC insurance companies substantially exceeded the RBC
requirements (the lowest capital ratio of any AFC subsidiary
was 3.5 times its authorized control level RBC; weighted
average of all AFC subsidiaries was 5.2 times).
<PAGE>
Sources of Funds  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, and
shareholder dividends.  Funds to meet these obligations come
primarily from dividend and tax payments from their
subsidiaries.

    Management believes these parent holding companies have
sufficient resources to meet their liquidity requirements
through operations in the short-term and long-term future.  If
funds generated from operations, including dividends from
subsidiaries, are insufficient to meet fixed charges in any
period, AFC would be required to generate cash through
borrowings, sales of securities or other assets, or similar
transactions.
                                  28
<PAGE>
Prior to the Mergers, American Premier had substantial cash and short-
term investments at the parent company level.  Subsequent to
the Mergers, AFC and two of its subsidiaries entered into
separate credit agreements with American Premier.  Funds
borrowed from American Premier under these agreements were used
for debt retirements, capital contributions to subsidiaries,
and other corporate purposes.  In December 1996, American
Premier paid a dividend to AFG in the form of a $675 million
note receivable from AFC under the credit agreement plus
$18.7 million of related accrued interest.  AFG then
contributed $450 million of the note (without accrued interest)
to the capital of AFC.  Subsequent to the Mergers, American
Premier entered into a credit agreement with AFG under which
American Premier and AFG made loans of up to $250 million
available to each other.

    The AFC and APU credit agreements with AFG were replaced in
December 1997 with a reciprocal Master Credit Agreement among
the various AFG holding companies under which funds are made
available to each other for general corporate purposes.
Amounts due AFG under the above agreements were $377 million
and $401 million at December 31, 1997 and 1996, respectively.

   In 1996, three nationally recognized rating agencies issued
or upgraded ratings on AFC, American Premier and AAG public
debentures.  All of the AFC and AAG senior debentures are now
rated investment grade; the APU and AAG subordinated debentures
are rated investment grade by two of the agencies.  Generally,
the upgrades reflect the expectation that AFC's consolidated
debt to total capital will remain conservative and that
coverage ratios will benefit from higher subsidiary earnings
and a lower level of fixed charges at AFG's subsidiaries.

   A new five-year, $300 million bank credit line was
established by AFC in February 1998 replacing two subsidiary
holding company lines.  The new credit line provides ample
liquidity and can be used to obtain funds for operating
subsidiaries or, if necessary, for the parent companies.  At
December 31, 1997, there was $45 million borrowed under the two
holding company lines.

    In the past, funds have been borrowed under bank facilities
and used for working capital, capital infusions into
subsidiaries, and to retire other issues of short-term or high-
rate debt and preferred stock.  Also, AFC believes it may be
prudent and advisable to utilize portions of the bank debt in
the normal course over the next year or two.

    In 1996 and 1997, wholly-owned trust subsidiaries of AAG
sold preferred securities for cash proceeds totaling
$225 million.  Proceeds were used to retire outstanding debt
and AAG preferred stock and for general corporate purposes,
including a capital contribution to a subsidiary.
<PAGE>
    Payments of dividends by AFC's insurance subsidiaries are
subject to various laws and regulations which limit the amount
of dividends that can be paid without regulatory approval.
Under Ohio law, the maximum amount of dividends which may be
paid without (i) prior approval or (ii) expiration of a 30 day
waiting period without disapproval is the greater of statutory
net income or 10% of policyholders' surplus as of the preceding
December 31, but only to the extent of earned surplus as of the
preceding December 31.  The maximum amount of dividends payable
(without prior approval) to AFC in 1998 from its insurance
subsidiaries is approximately $221 million.

    For statutory accounting purposes, equity securities are
generally carried at market value.  At December 31, 1997,
AFC's insurance companies owned publicly traded equity
securities with a market value of $1.5 billion, including
equity securities of AFC affiliates (including subsidiaries)
of $1.1 billion.  Since significant amounts of these are
concentrated in a relatively small number of companies,
decreases in the market prices could adversely affect the
insurance group's capital, potentially impacting the amount of
dividends available or necessitating a capital contribution.
Conversely, increases in the market prices could have a
favorable impact on the group's dividend-paying capability.

                                  29
<PAGE>
    Beginning with the 1997 federal tax return, American
Premier will join AFC's consolidated return.  Under tax
allocation agreements with AFC, its 80%-owned U.S.
subsidiaries generally compute tax provisions as if filing
separate returns based on book taxable income computed in
accordance with generally accepted accounting principles.  The
resulting provision (or credit) is currently payable to (or
receivable from) AFC.

Uncertainties  Two lawsuits were filed in 1994 against
American Premier by USX Corporation ("USX") and a former USX
subsidiary.  The lawsuits seek contribution from American
Premier for all or a portion of a $600 million final antitrust
judgment entered against a USX subsidiary in 1994.  The
lawsuits argue that USX's liability for that judgment is
attributable to the alleged activities of American Premier's
predecessor in an unlawful antitrust conspiracy among certain
railroad companies.  American Premier and its outside counsel
believe that American Premier has substantial defenses and
should not suffer a material loss as a result of this
litigation.

   Great American's liability for unpaid losses and loss
adjustment expenses includes amounts for various liability
coverages related to environmental, hazardous product and
other mass tort claims.  At December 31, 1997, Great American
had recorded $348 million (net of reinsurance recoverables of
$173 million) for such claims on policies written many years
ago where, in most cases, coverage was never intended.  Due to
inconsistent court decisions on many coverage issues and the
difficulty in determining standards acceptable for cleaning up
pollution sites, significant uncertainties exist which are not
likely to be resolved in the near future.

    AFC's subsidiaries are parties in a number of proceedings
relating to former operations.  See Note O to the financial
statements.

    Most businesses utilizing computing technology are facing
a problem with the year 2000.  The Year 2000 problem is caused
by the widespread use of computer programs that lack the
ability to properly interpret two-digit codes representing the
year 2000 and beyond.  This program flaw can cause computation
errors, faulty information processing and reporting and, in
some instances, complete shutdown of critical applications.

    During the early 1990's Great American designed and
developed software to automate the Year 2000 conversion
process.  In 1995 Great American formed Millennium Dynamics,
Inc. ("MDI") to publicly market its software and consultative
services worldwide.  In connection with the sale of MDI in the
fourth quarter of 1997, AFC retained licenses to utilize MDI's
software internally.

    Each segment of AFC's operations is comprised of multiple
business units most of which utilize stand-alone computer
programs.  These businesses are in the process of either (i)
modifying their programs utilizing the MDI software along with
<PAGE>
other internal and external resources or (ii) replacing
programs with new software that is Year 2000 compliant.  AFC's
goal is to have program modifications and new software
installations substantially completed by the end of 1998.  A
significant portion of AFC's Year 2000 project will be
completed using internal staff.  Incremental Year 2000 costs
are not expected to have a material effect on AFC's financial
statements.

    Projected Year 2000 costs and completion dates are based
on management's best estimate.  However, there can be no
assurance that these estimates will be achieved.  Factors such
as the availability of trained personnel could affect the
successful completion of the project.  Should software
modifications and new software installation not be completed
on a timely basis, the resulting disruptions could have a
material adverse impact on operations.

                                  30
<PAGE>
   AFC's operations could also be affected by the inability of
third parties such as agents and vendors to successfully become
Year 2000 compliant.  In addition, AFC's property and casualty
insurance operations are reviewing policy forms and amendatory
endorsements and examining coverage issues for Year 2000
exposures.  Management believes that these issues will not have
a material impact on AFC's financial statements.

    While the results of all such uncertainties cannot be
predicted, based upon its knowledge of the facts,
circumstances and applicable laws, management believes that
sufficient reserves have been provided.

Investments  Approximately 70% of AFC's consolidated assets
are invested in marketable securities.  A diverse portfolio of
primarily publicly traded bonds and notes accounts for 95% of
these securities.  AFC attempts to optimize investment income
while building the value of its portfolio, placing emphasis
upon long-term performance.  AFC's goal is to maximize return
on an ongoing basis rather than focusing on short-term
performance.

    Fixed income investment funds are generally invested in
securities with short-term and intermediate-term maturities
with an objective of optimizing total return while allowing
flexibility to react to changes in market conditions.  At
December 31, 1997, the average life of AFC's bonds and
redeemable preferred stocks was just over 6 years.

    Approximately 93% of the bonds and redeemable preferred
stocks held by AFC were rated "investment grade" (credit
rating of AAA to BBB) by nationally recognized rating agencies
at December 31, 1997.  Investment grade securities generally
bear lower yields and lower degrees of risk than those that
are unrated and non-investment grade.  Management believes
that the high quality investment portfolio should generate a
stable and predictable investment return.

    Investments in mortgage-backed securities ("MBSs")
represented approximately one-fourth of AFC's bonds and
redeemable preferred stocks at December 31, 1997.  AFC invests
primarily in MBSs which have a reduced risk of prepayment.
In addition, the majority of MBSs held by AFC were purchased at
a discount.  Management believes that the structure and discounted
nature of the MBSs will mitigate the effect of prepayments on
earnings over the anticipated life of the MBSs portfolio.  More than
90% of AFC's MBSs are rated "AAA" with substantially all being of
investment grade quality.  The market in which these securities trade
is highly liquid.  Aside from interest rate risk, AFC does not believe
a material risk (relative to earnings or liquidity) is inherent in
holding such investments.

    Because most income of the property and casualty insurance
subsidiaries has been sheltered from income taxes through
1997, non-taxable municipal bonds represent only a small
portion (less than 1%) of the portfolio.
<PAGE>
    AFC's equity securities are concentrated in a relatively
limited number of major positions.  This approach allows
management to more closely monitor the companies and
industries in which they operate.

    Prior to the Mergers, the realization of capital gains,
primarily through sales of equity securities, was an integral
part of AFC's investment program.  Individual securities are
sold creating gains or losses as market opportunities exist.
Pretax capital gains recognized upon disposition of
securities, including investees, during the past five years
have been:  1997 - $57 million; 1996 - $166 million; 1995 -
$84 million; 1994 - $50 million and 1993 - $165 million.  At
December 31, 1997, the net unrealized gain on AFC's bonds and
redeemable preferred stocks was $389 million; the net
unrealized gain on equity securities was $293 million.

                                  31
<PAGE>
RESULTS OF OPERATIONS - THREE YEARS ENDED DECEMBER 31, 1997

General  As previously noted, financial statements for periods
subsequent to the April 1995 Mergers include the accounts of
American Premier. AFC had accounted for American Premier as an
investee from the second quarter of 1993 through the first
quarter of 1995.  Accordingly, income statement components for
1997 and 1996 are not comparable to prior years.

    Pretax earnings before extraordinary items were
$334 million in 1997, $340 million in 1996 and $252 million in 1995.

   Results for 1997 include $91 million in pretax gains
   primarily on the sales of affiliates and other securities,
   and reflect declines of $41 million in underwriting results
   in AFC's property and casualty insurance business.

   Results for 1996 include $203 million in pretax gains
   primarily on the sales of Citicasters and Buckeye Management
   Company, reduced by a charge of $80 million resulting from a
   decision to strengthen insurance reserves relating to
   asbestos and other environmental matters ("A&E").

    In addition to the earnings contribution resulting from the
   Mergers, results for 1995 include $84 million in pretax
   gains on the sale of securities.

Property and Casualty Insurance - Underwriting  AFC manages and
operates its property and casualty business as three major
sectors.  The nonstandard automobile insurance companies (the
"NSA Group") insure risks not typically accepted for standard
automobile coverage because of the applicant's driving record,
type of vehicle, age or other criteria.  The specialty lines
are a diversified group of over twenty-five business lines that
offer a wide variety of specialty insurance products.  Some of
the more significant areas are California workers'
compensation, executive liability, inland and ocean marine,
U.S.-based operations of Japanese companies, agricultural-
related coverages, non-profit liability, general aviation
coverages, fidelity and surety bonds, and umbrella and excess.
The commercial and personal lines provide coverages in worker's
compensation, commercial multi-peril, umbrella and commercial
automobile, standard private passenger automobile and
homeowners insurance.

   To understand the overall profitability of particular lines,
the timing of claims payments and the related impact of
investment income must be considered. Certain "short-tail"
lines of business (primarily property coverages) have quick
loss payouts which reduce the time funds are held, thereby
limiting investment income earned thereon.  On the other hand,
"long-tail" lines of business (primarily liability coverages
and workers' compensation) have payouts that are either
structured over many years or take many years to settle,
thereby significantly increasing investment income earned on
related premiums received.
<PAGE>
   Underwriting profitability is measured by the combined ratio
which is a sum of the ratios of underwriting losses, loss
adjustment expenses, underwriting expenses and policyholder
dividends to premiums.  When the combined ratio is under 100%,
underwriting results are generally considered profitable; when
the ratio is over 100%, underwriting results are generally
considered unprofitable.  The combined ratio does not reflect
investment income, other income or federal income taxes.

   For certain lines of business and products where the
credibility of the range of loss projections is less certain
(primarily the various specialty lines listed above),
management believes that it is prudent and appropriate to use
conservative assumptions until such time as the data,
experience and projections have more credibility, as evidenced
by data volume, consistency and maturity of the data.  While
this practice mitigates the risk of adverse development on this
business, it does not eliminate it.

                                32
<PAGE>
   While AFC desires and seeks to earn an underwriting profit
on all of its business, it is not always possible to do so.  As
a result, AFC attempts to expand in the most profitable areas
and control growth or even reduce its involvement in the least
profitable ones.

   In 1997, underwriting results of AFC's insurance operations
outperformed the industry average for the twelfth consecutive
year.  AFC's insurance operations have been able to exceed the
industry's results by focusing on growth opportunities in the
more profitable areas of the specialty lines and nonstandard
auto businesses.

   Comparisons made in the following discussion of AFC's
insurance operations include American Premier's insurance
operations even though they were not consolidated in the
financial statements prior to the Mergers.

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

                                              1997    1996    1995
  Net Written Premiums (GAAP)
  NSA Group                                 $1,248  $1,135  $1,277
  Specialty Operations                       1,103     993   1,097
  Commercial and Personal Operations           507     660     717
  Other Lines                                  -       -         1
                                            $2,858  $2,788  $3,092

  Combined Ratios (GAAP)
  NSA Group                                   97.2%   99.9%  105.2%
  Specialty Operations                        99.0    84.1    94.8
  Commercial and Personal Operations         106.0   110.6    99.1
  Aggregate (including A&E and other lines)  101.4   102.9   101.2

   Operating results for 1996 were adversely impacted by two
unusual items: (i) higher than normal catastrophe losses
including approximately $30 million in losses due to Hurricane
Fran and (ii) increases in A&E reserves (exposures for which
AFC may be liable under general liability policies written
years ago).  A standard insurance measure used in analyzing the
adequacy of A&E reserves is the "survival ratio" (reserves
divided by three-year average annual paid losses).  Due in part
to the greater uncertainties inherent in estimating A&E claims,
management evaluates its survival ratio in relation to those
published for the industry.  Based primarily on industry
survival ratios published in mid-1996, AFC increased A&E
reserves of its discontinued insurance lines by $120 million by
recording a third quarter, non-cash pretax charge of
$80 million and reallocating $40 million, or approximately 2%,
of reserves from its Specialty Operations.  Reserves for unpaid
losses and loss adjustment expenses of the Specialty Lines were
approximately $2.0 billion, $2.1 billion and $2.2 billion at
December 31, 1997, 1996 and 1995, respectively.  A&E reserves
at December 31, 1997, were approximately $348 million, an
amount equal to approximately 10 times the preceding three
years' average claim payments.
<PAGE>
   NSA Group  The NSA Group's 10% increase in net written
premiums during 1997 is due primarily to volume increases in
California resulting from enactment of legislation which
requires drivers to provide proof of insurance in order to
obtain a valid permit.  During 1995 and early 1996, the NSA
Group implemented premium rate increased in various states.  In
1996, the higher rate levels along with competitive pressures
in the nonstandard automobile insurance industry resulted in an
11% decline in net written premiums.  These rate increases
contributed to the improvement in combined ratio in 1997 and
1996.

                                33
<PAGE>
   Specialty Operations  Net written premiums for the specialty
operations increased 11% in 1997 due primarily to premiums
recorded by a newly acquired aviation division and the return
of premiums in 1996 related to the withdrawal from a voluntary
pool.  The specialty operations had profitable underwriting
results for 1997 despite a significant decline in the results
of AFC's California workers' compensation business relating to
(i) deteriorating underwriting margins on business written in
1996 and 1997 and (ii) reserve reductions in 1996 primarily for
business written prior to 1995 in response to fundamental
changes in the California workers' compensation market and
actuarial evaluations.  The specialty lines combined ratio was
unusually low in 1996 due primarily to the reallocation of
$40 million in reserves to A&E reserves (a combined ratio
impact of 4.1 percentage points) and the 1996 reductions in
California workers' compensation reserves mentioned above.

   Net written premiums for the specialty operations declined
9% during 1996 due primarily to a decrease in the California
workers' compensation business and withdrawal from an
unprofitable pool at the end of 1995, partially offset by
increases in other specialty niche lines.  The decline in
California workers' compensation premiums reflects (i)
extremely competitive pricing in the marketplace as a result of
the repeal of the California workers' compensation minimum rate
law effective January 1, 1995 and (ii) the impact of mandatory
premium rate reductions which took effect a year earlier.

   Excluding the impact of the decreases in the California
workers' compensation business and the withdrawal from the
voluntary pool, specialty net written premiums increased
$16 million (2%) in 1996.  The increase is due in part to
increases in specialized coverages for fidelity and surety
bonds, executive liability, animal mortality and collateral
protection exposures.

   Commercial and Personal Operations  Net written premiums for
the commercial and personal operations decreased 23% in 1997
due primarily to a reinsurance agreement, effective January 1,
1997, under which 80% of all AFC's homeowners' business was
reinsured, and reduced writings of personal automobile
coverages in certain states.  Excluding the impact of the
reinsurance agreement, premiums decreased 10%.  Even though
underwriting results for 1997 were impacted by several current
year commercial casualty losses as well as adverse development
in certain prior year claims, improvements in personal lines
contributed to a lower combined ratio.
<PAGE>
   Net written premiums for the commercial and personal
operations decreased 8% in 1996.  The decrease is due primarily
to significant reductions in homeowners coverages in certain
states as well as competitive pricing conditions in the
commercial casualty market, partially offset by increases in
writings of workers' compensation coverages.  The profitability
of the commercial and personal operations declined in 1996 due
primarily to deterioration in personal lines operations as well
as weather-related losses, including losses from Hurricane
Fran.

Life, Accident and Health Premiums and Benefits  Life, accident
and health premiums and benefits increased in 1997 due
primarily to an increase in pre-need life insurance sales
through the largest owner of funeral homes in the world.  The
increase in life, accident and health premiums and expenses in
1996 reflects AAG's acquisition of American Memorial and Loyal.

Investment Income  Changes in investment income reflect
fluctuations in market rates and changes in average invested
assets.

   1997 compared to 1996  Investment income increased
$23.4 million (3%) from 1996 due primarily to an increase in
the average amount of investments held partially offset by
lower interest rates available in the marketplace.

                                  34
<PAGE>
   1996 compared to 1995  Investment income increased
$96 million (13%) from 1995; adjusting for the effects of the
Mergers retroactively to January 1, 1995, investment income
increased $55 million (7%) from 1995 due primarily to an
increase in the average amount of investments held.

Investee Corporations  Equity in net earnings of investee
corporations (companies in which AFC owns a significant portion of
the voting stock) represents AFC's proportionate share of the
investees' earnings and losses.

   1997 compared to 1996  AFC recorded equity in net losses of
investee corporations of $5.6 million in 1997 and $17 million in
1996.  Chiquita's loss attributable to common shareholders was $17
million for 1997; results were adversely affected by a stronger
dollar in relation to major European currencies (mitigated in part
by the company's foreign currency hedging program) and by
increased banana production costs resulting primarily from
widespread flooding in 1996.  These factors more than offset the
benefit of higher local currency banana pricing in Europe during
the second half of the year.  For 1996, the loss attributable to
common shareholders was $63 million and included pretax writedowns
and costs of $70 million resulting from (i) industry-wide flooding
in Costa Rica, Guatemala and Honduras, (ii) certain strategic
undertakings designed to achieve further long-term reductions in
the delivered product cost of Chiquita bananas and (iii) certain
claims relating to prior European Union quota restructuring
actions.

   1996 compared to 1995  AFC's equity in net earnings of
investee corporations decreased $32 million in 1996 compared to
1995.  Chiquita reported a decrease in earnings attributable to
common shareholders of $63 million in 1996 due primarily to the
pretax writedowns and costs of $70 million mentioned above.
Earnings attributable to common shareholders for 1995 were
$946,000 and included a pretax gain of $19 million primarily
resulting from divestitures of operations and other actions
taken as part of the company's ongoing program to improve
shareholder value.  These divestitures and other actions
included sales of older ships, the sale of Chiquita's Costa
Rican edible oils operations, the shut-down of a portion of
Chiquita's juice operations and the reconfiguration of banana
production assets.

Gains on Sales of Investees  The gain on sale of investee in
1997 represents a pretax gain to AFC as a result of Chiquita's
public issuance of 4.6 million shares of its common stock.  The
gain on sale of investee in 1996 represents a pretax gain,
before $6.5 million of minority interest, on the sale of
Citicasters common stock.

Gains on Sales of Subsidiaries  The gains on sales of
subsidiaries in 1997 include (i) a pretax gain of $49.9 million
on the sale of MDI and (ii) a charge of $17 million relating to
operations expected to be sold or otherwise disposed of in 1998.
<PAGE>
The gains on sales of subsidiaries in 1996 include a pretax gain
of $33.9 million on the sale of Buckeye Management Company and
the settlement of litigation related to a subsidiary sold in
1993.

Other Income  Other income increased $18.0 million (13%) in 1997
compared to 1996 due primarily to income of $46.3 million from
the sale of development rights in New York City (including
$32.5 million on rights sold to AFG), partially offset by the
absence of revenues from a non-insurance subsidiary which was
sold in the first quarter of 1997.

Annuity Benefits  For GAAP financial reporting purposes,
annuity receipts are accounted for as interest-bearing deposits
("annuity benefits accumulated") rather than as revenues.
Under these contracts, policyholders' funds are credited with
interest on a tax-deferred basis until withdrawn by the
policyholder.  Annuity benefits represent primarily interest
related to annuity policyholders' funds held.  The rate at which AAG
credits interest on most of its annuity policyholders' funds is
subject to change based on management's judgment of market
conditions.

                                  35
<PAGE>
   Fixed annuity receipts totaled approximately $490 million in
1997, $570 million in 1996 and $460 million in 1995.  Annuity
receipts increased each year from 1993 through 1996 due
primarily to sales of newly introduced single premium products
and, in 1995, the development of new distribution channels.
Annuity receipts in 1997 reflect the decrease of business
written by a single agency from $99 million in 1996 to
$23 million in 1997.  AAG is no longer writing business through
this agency.

   Annuity benefits increased $7 million (3%) in 1997 and
$17.2 million (7%) in 1996 due primarily to an increase in
average annuity benefits accumulated partially offset by
decreases in crediting rates on AAG's fixed rate annuities.

Interest on Borrowed Money  Changes in interest expense result
from fluctuations in market rates as well as changes in
borrowings.  AFC has generally financed its borrowings on a
long-term basis which has resulted in higher current costs.

   1997 compared to 1996  Interest expense increased
$1.0 million (1%) from 1996.  The increase reflects increased
borrowings from AFG, partially offset by the effect of
significant debt reductions during 1996.

   1996 compared to 1995  Interest expense for 1996 was
$86.1 million and interest expense for 1995, adjusted to
reflect the effect of the Mergers retroactively to January 1,
1995, was $116.3 million.  The $30 million (26%) decrease
reflects significant debt retirements during both 1995 and
1996.

Minority Interest Expense  Minority interest expense represents
the interests of AFG (parent) and non-controlling shareholders of
AFC subsidiaries in the earnings of those subsidiaries as well as
accrued distributions on trust preferred securities. Minority
interest expense for 1996 includes $6.5 million related to the
sale of Citicasters shares held by AFEI.

Other Operating and General Expenses  Operating and general
expenses in 1997 include third quarter charges of $5.5 million
relating to an arbitration settlement and $4.0 million relating
to relocating a subsidiary's operations to Cincinnati.  These
charges were more than offset by a reduction caused by the
absence of expenses from a non-insurance subsidiary which was
sold in the first quarter of 1997.

Income Taxes  See Note M to the Financial Statements for an
analysis of items affecting AFC's effective tax rate.
<PAGE>
New Accounting Standards to be Implemented  During 1997, the
Financial Accounting Standards Board issued the following
Statement of Financial Accounting Standards ("SFAS"); the
implementation of these standards will not have a significant
effect on AFC's financial position or results of operations.

  SFAS #      Subject of Standard      Period to be Implemented
   130        Comprehensive Income          1st quarter of 1998
   131        Segment Information           4th quarter of 1998

   SFAS No. 130 establishes standards for the reporting of a
company's change in equity during the period from non-owner
sources.  For AFC, comprehensive income will principally
consist of net income and the change in net unrealized gains on
marketable securities.  SFAS No. 131 establishes standards for
the way companies report information about operating segments,
products and services, geographic areas and major customers.
Implementation of these standards will not have a significant
effect on AFC's financial position, net income or reported
segments.

                                  36
<PAGE>

                                ITEM 8

             Financial Statements and Supplementary Data

                                                               Page

Report of Independent Auditors                                  F-1

Consolidated Balance Sheet:
   December 31, 1997 and 1996                                   F-2

Consolidated Statement of Earnings:
   Years ended December 31, 1997, 1996 and 1995                 F-3

Consolidated Statement of Changes in Shareholders' Equity:
   Years ended December 31, 1997, 1996 and 1995                 F-4

Consolidated Statement of Cash Flows:
   Years ended December 31, 1997, 1996 and 1995                 F-5

Notes to Consolidated Financial Statements                      F-6


"Selected Quarterly Financial Data" has been included in Note P to the
Consolidated Financial Statements.

          _______________________________________________


                             PART III

   The information required by the following Items will be
included in AFC's definitive Proxy Statement for the 1998
Annual Meeting of Shareholders which will be filed with the
Securities and Exchange Commission within 120 days after the
end of Registrant's fiscal year and is incorporated herein by
reference.


   ITEM 10     Directors and Executive Officers of the Registrant


   ITEM 11     Executive Compensation


   ITEM 12     Security Ownership of Certain Beneficial Owners and Management


   ITEM 13     Certain Relationships and Related Transactions


                                  37
 <PAGE>

                    REPORT OF INDEPENDENT AUDITORS


 Board of Directors
 American Financial Corporation

 We have audited the accompanying consolidated balance sheet of
 American Financial Corporation and subsidiaries as of December 31,
 1997 and 1996, and the related consolidated statements of earnings,
 changes in shareholders' equity, and cash flows for each of the
 three years in the period ended December 31, 1997.  Our audits also
 included the financial statement schedules listed in the Index at
 Item 14(a). These financial statements and schedules are the
 responsibility of the Company's management.  Our responsibility is
 to express an opinion on these financial statements and schedules
 based on our audits.

 We conducted our audits in accordance with generally accepted
 auditing standards. Those standards require that we plan and perform
 the audit to obtain reasonable assurance about whether the financial
 statements are free of material misstatement.  An audit includes
 examining, on a test basis, evidence supporting the amounts and
 disclosures in the financial statements.  An audit also includes
 assessing the accounting principles used and significant estimates
 made by management, as well as evaluating the overall financial
 statement presentation.  We believe that our audits provide a
 reasonable basis for our opinion.

 In our opinion, the consolidated financial statements referred to
 above present fairly, in all material respects, the consolidated
 financial position of American Financial Corporation and
 subsidiaries at December 31, 1997 and 1996, and the consolidated
 results of their operations and their cash flows for each of the
 three years in the period ended December 31, 1997, in conformity
 with generally accepted accounting principles.  Also, in our
 opinion, the related financial statement schedules, when considered
 in relation to the basic financial statements taken as a whole,
 present fairly in all material respects the information set forth
 therein.




                                    ERNST & YOUNG LLP


 Cincinnati, Ohio
 March 6, 1998



                                 F-1
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEET
                            (In Thousands)

                                                             December 31,
                                                           1997         1996
Assets:
Cash and short-term investments                     $   231,227   $   404,831
Investments:
  Bonds and redeemable preferred stocks:
    Held to maturity - at amortized cost
     (market - $3,202,300 and $3,528,100)             3,120,106     3,491,126
    Available for sale - at market
     (amortized cost - $7,225,736 and $6,362,597)     7,532,836     6,494,597
  Other stocks - principally at market
    (cost - $153,322 and $142,364)                      446,222       327,664
  Investment in investee corporations                   200,714       199,651
  Loans receivable                                      512,608       568,055
  Real estate and other investments                     215,472       205,021
      Total investments                              12,027,958    11,286,114

Recoverables from reinsurers and prepaid
  reinsurance premiums                                  998,743       942,450
Agents' balances and premiums receivable                691,005       609,403
Deferred acquisition costs                              521,898       452,041
Other receivables                                       261,454       272,766
Deferred tax asset                                       41,413       137,284
Assets held in separate accounts                        300,491       247,579
Prepaid expenses, deferred charges and other assets     364,385       368,114
Cost in excess of net assets acquired                   299,408       278,581

                                                    $15,737,982   $14,999,163
<PAGE>
Liabilities and Shareholders' Equity:
Unpaid losses and loss adjustment expenses          $ 4,225,336   $ 4,123,701
Unearned premiums                                     1,328,910     1,247,806
Annuity benefits accumulated                          5,528,111     5,365,612
Life, accident and health reserves                      709,899       575,380
Payable to American Financial Group, Inc.               352,766       422,015
Other long-term debt:
  Holding companies                                     286,661       339,504
  Subsidiaries                                          194,084       178,415
Liabilities related to separate accounts                300,491       247,579
Accounts payable, accrued expenses and other
  liabilities                                           908,622       915,398
     Total liabilities                               13,834,880    13,415,410

Minority interest                                       509,619       306,858

Shareholders' Equity:
  Preferred Stock (liquidation value
    - $72,154 and $258,638)                              72,154       162,760
  Common Stock, no par value
   - 20,000,000 and 53,500,000 shares authorized
   - 10,593,000 and 45,000,000 shares outstanding         9,625         9,625
  Capital surplus                                       936,154       919,746
  Retained earnings                                      34,350         1,364
  Net unrealized gain on marketable securities,
    net of deferred income taxes                        341,200       183,400
     Total shareholders' equity                       1,393,483     1,276,895

                                                    $15,737,982   $14,999,163

See notes to consolidated financial statements.

                                 F-2
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENT OF EARNINGS
                            (In Thousands)


                                                    Year ended December 31,
                                                  1997        1996        1995
Income:
  Property and casualty insurance premiums  $2,824,381  $2,844,512  $2,648,703
  Life, accident and health premiums           121,506     103,552      15,691
  Investment income                            868,689     845,330     749,510
  Equity in net earnings (losses) of
    investees                                   (5,564)    (16,955)     15,237
  Realized gains (losses) on sales of
    securities                                  46,006     (3,470)      84,028
  Gains on sales of investees                   11,428     169,138         335
  Gains on sales of subsidiaries                33,602      36,837        -
  Other income                                 152,854     134,904     114,602
                                             4,052,902   4,113,848   3,628,106

Costs and Expenses:
  Property and casualty insurance:
    Losses and loss adjustment expenses      2,075,616   2,131,421   1,977,395
    Commissions and other underwriting
      expenses                                 790,324     793,800     707,340
  Annuity benefits                             278,829     271,821     254,650
  Life, accident and health benefits           110,082      92,315      13,202
  Interest charges on borrowed money            87,155      86,148     122,568
  Minority interest expense                     45,477      54,748      28,165
  Other operating and general expenses         331,655     344,052     272,888
                                             3,719,138   3,774,305   3,376,208
Earnings before income taxes and
  extraordinary items                          333,764     339,543     251,898
Provision for income taxes                     125,227      89,658      56,447

Earnings before extraordinary items            208,537     249,885     195,451

Extraordinary items - gain (loss) on
  prepayment of debt                            (7,147)    (27,889)      1,832

Net Earnings                                $  201,390  $  221,996  $  197,283




See notes to consolidated financial statements.


                                 F-3
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
      CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                            (In Thousands)
<TABLE>
<CAPTION>
                                                     Common Stock                       Net
                                          Preferred   and Capital    Retained    Unrealized
                                              Stock       Surplus    Earnings          Gain
<S>                                        <C>           <C>         <C>          <C>
Balance at December 31, 1994               $168,484      $    904    $223,095     $   3,500

Adjustment for pooling of
  interests at April 3, 1995                   -          454,969        -            2,400
Net earnings                                   -             -        197,283          -
Change in unrealized                           -             -           -          234,600
Exercise of stock options                      -            8,721        -             -
Dividends on:
  Preferred Stock                              -             -        (25,397)         -
  Common Stock                                 -             -        (29,855)         -
Capital contribution from parent               -            9,333        -             -
Change in foreign currency translation         -               64        -             -
Balance at December 31, 1995                168,484       473,991     365,126       240,500

Net earnings                                   -             -        221,996          -
Change in unrealized                           -             -           -          (57,100)
Dividends on:
  Preferred Stock                              -             -        (24,898)         -
  Common Stock                                 -             -       (560,860)         -
Purchases and redemptions                   (22,524)      (14,388)       -             -
Sale of preferred shares to
  employee benefit plan                      16,800          -           -             -
Capital contribution from parent               -          468,666        -             -
Change in foreign currency translation         -            1,102        -             -
Balance at December 31, 1996                162,760       929,371       1,364       183,400

Net earnings                                   -             -        201,390          -
Change in unrealized                           -             -           -          157,800
Dividends on:
  Preferred Stock                              -             -        (15,071)         -
  Common Stock                                 -             -           -             -
Purchases and redemptions                  (162,760)         -       (153,333)         -
Issuance of Preferred Stock                  72,154          -           -             -
Capital contribution from parent               -           16,707        -             -
Change in foreign currency translation         -             (299)       -             -
Balance at December 31, 1997               $ 72,154      $945,779    $ 34,350      $341,200
</TABLE>

See notes to consolidated financial statements.


                                 F-4
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF CASH FLOWS
                            (In Thousands)
<TABLE>
<CAPTION>
                                                            Year ended December 31,
Operating Activities:                                  1997          1996          1995
<S>                                             <C>           <C>           <C>
  Net earnings                                   $  201,390    $  221,996    $  197,283
  Adjustments:
    Extraordinary items                               7,147        27,889        (1,832)
    Depreciation and amortization                    76,434        79,425        47,760
    Annuity benefits                                278,829       271,821       254,650
    Equity in net (earnings) losses of
      investee corporations                           5,564        16,955       (15,237)
    Changes in reserves on assets                     7,610         5,656         2,302
    Realized gains on investing activities         (135,657)     (198,676)      (84,995)
    Decrease (increase) in reinsurance and
      other receivables                            (189,643)       95,553        25,781
    Decrease (increase) in other assets             (48,309)       23,665       (10,955)
    Increase in insurance claims and reserves       206,900         9,171       137,180
    Decrease in other liabilities                   (29,935)     (211,697)     (255,404)
    Increase in minority interest                    36,440        52,333        18,989
    Dividends from investees                          4,799         4,799         9,568
    Other, net                                      (25,711)       (3,989)       (1,233)
                                                    395,858       394,901       323,857
Investing Activities:
  Purchases of and additional investments in:
    Fixed maturity investments                   (2,555,060)   (2,128,015)   (2,378,427)
    Equity securities                               (37,107)      (10,528)       (1,034)
    Investees and subsidiaries                      (93,841)         -          (68,591)
    Real estate, property and equipment             (64,915)      (38,035)      (42,579)
  Maturities and redemptions of fixed maturity
    investments                                     897,786       615,849       308,526
  Sales of:
    Fixed maturity investments                    1,407,598       881,114     2,310,837
    Equity securities                               104,960        53,195        17,379
    Investees and subsidiaries                       32,500       284,277          -
    Real estate, property and equipment              23,289         7,981        27,759
  Cash and short-term investments of acquired
    (former) subsidiary                               2,714        (4,589)      392,100
  Decrease (increase) in other investments          (12,892)          594        (7,326)
                                                   (294,968)     (338,157)      558,644

<PAGE>
Financing Activities:
  Fixed annuity receipts                            493,708       573,741       457,525
  Annuity surrenders, benefits and withdrawals     (607,174)     (517,881)     (412,854)
  Additional long-term borrowings                   184,150       288,775       337,076
  Reductions of long-term debt                     (230,688)     (582,288)   (1,061,187)
  Borrowings from AFG                               201,000       152,471       102,202
  Payments to AFG                                  (224,500)      (61,000)      (18,174)
  Issuance of Preferred Stock                          -           16,800          -
  Repurchases of Preferred Stock                   (243,939)      (36,912)       (2,880)
  Exercise of stock options                            -             -            8,721
  Issuance of trust preferred securities            149,353        72,412          -
  Capital contribution                               18,667        18,666         9,333
  Cash dividends paid                               (15,071)      (24,898)      (25,397)
                                                   (274,494)     (100,114)     (605,635)

Net Increase (Decrease) in Cash and Short-term
    Investments                                    (173,604)      (43,370)      276,866
Cash and short-term investments at beginning
  of period                                         404,831       448,201       171,335
Cash and short-term investments at end of
  period                                         $  231,227    $  404,831    $  448,201

</TABLE>
See notes to consolidated financial statements.

                                 F-5
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


_______________________________________________________________________________
                          INDEX TO NOTES

   A. Mergers                                  J. Minority Interest
   B. Accounting Policies                      K. Preferred Stock
   C. Acquisitions and Sales of Subsidiaries   L. Common Stock
        and Investees                          M. Income Taxes
   D. Segments of Operations                   N. Extraordinary Items
   E. Investments                              O. Commitments and Contingencies
   F. Investment in Investee Corporations      P. Quarterly Operating Results
   G. Cost in Excess of Net Assets Acquired    Q. Insurance
   H. Payable to American Financial Group      R. Additional Information
   I. Other Long-Term Debt

_______________________________________________________________________________


A. Mergers  On April 3, 1995, American Financial Corporation
   ("AFC") merged with a newly formed subsidiary of American
   Financial Group, Inc. ("AFG"), a new company formed to own
   100% of the common stock of both AFC and American Premier
   Underwriters, Inc. ("American Premier" or "APU").  In the
   transaction, Carl H. Lindner and members of his family, who
   owned 100% of the Common Stock of AFC, exchanged their AFC
   Common Stock for approximately 55% of American Financial
   Group voting common stock.  Former shareholders of American
   Premier, including AFC and its subsidiaries, received shares
   of American Financial Group stock on a one-for-one basis.
   No gain or loss was recorded on the exchange of shares.

   AFC continues to be a separate SEC reporting company with
   publicly traded debentures and preferred stock.  Holders of
   AFC Series F and G Preferred Stock were granted voting rights
   equal to approximately 21% of the total voting power of AFC
   shareholders immediately prior to the Mergers.

   At the close of business on December 31, 1996, AFG contributed
   to AFC 81% of the common stock of American Premier.  Since AFC
   and American Premier are under the common control of AFG, the
   acquisition of American Premier has been recorded by AFC at
   AFG's historical cost in a manner similar to a pooling of
   interests.  Accordingly, the historical consolidated financial
   statements of AFC for periods subsequent to the April 3, 1995
   Mergers have been restated to include the accounts of American
   Premier.
<PAGE>
B. Accounting Policies

   Basis of Presentation  The consolidated financial statements
   include the accounts of AFC and its subsidiaries.  Mergers and
   changes in ownership levels of subsidiaries and affiliates
   have resulted in certain differences in the financial
   statements and have affected comparability between years.
   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.
   With the exception of the acquisition of American Premier, all
   acquisitions have been treated as purchases and the results of
   operations of companies since their formation or acquisition
   are included in the consolidated financial statements.

   The preparation of the financial statements in conformity with g
   enerally accepted accounting principles 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.

                                 F-6
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

   AFC's voting ownership of subsidiaries and significant
   affiliates at December 31, was as follows:
                                                       1997   1996   1995
      American Annuity Group, Inc. ("AAG")              81%    81%    81%
      American Financial Enterprises, Inc. ("AFEI")     80%    83%    83%
      American Premier Underwriters, Inc.               81%    81%     -
      Chiquita Brands International, Inc.               39%    43%    44%
      Citicasters Inc.                                   -     (a)    38%

      (a) Sold in September 1996.

   Investments  Debt securities are classified as "held to
   maturity" and reported at amortized cost if AFC has the
   positive intent and ability to hold them to maturity.  Debt
   and equity securities are classified as "available for sale"
   and reported at fair value with unrealized gains and losses
   reported as a separate component of shareholders' equity if
   the securities are not classified as held to maturity or
   bought and held principally for selling in the near term.
   Only in certain limited circumstances, such as significant
   issuer credit deterioration or if required by insurance or
   other regulators, may a company change its intent to hold a
   certain security to maturity without calling into question its
   intent to hold other debt securities to maturity in the
   future.

   Premiums and discounts on mortgage-backed securities are
   amortized over their expected average lives using the interest
   method.  Gains or losses on sales of securities are recognized
   at the time of disposition with the amount of gain or loss
   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 carrying value of that investment is
   reduced.

   Short-term investments are carried at cost; loans receivable
   are stated primarily at the aggregate unpaid balance.

   Investment in Investee Corporations  Investments in securities
   of 20%- to 50%-owned companies are generally carried at cost,
   adjusted for AFC's proportionate share of their undistributed
   earnings or losses.

   Cost in Excess of Net Assets Acquired  The excess of cost of
   subsidiaries and investees over AFC's equity in the underlying
   net assets ("goodwill") is being amortized over 40 years.

   Insurance  As discussed under "Reinsurance" below, unpaid
   losses and loss adjustment expenses and unearned premiums have
   not been reduced for reinsurance recoverable.
<PAGE>
       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 the 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 reinsurance 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 reinsurers.

                                 F-7
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

       Deferred Acquisition Costs  Policy acquisition costs
   (principally commissions, premium taxes and other underwriting
   expenses) related to the production of new business are
   deferred ("DPAC").  For the property and casualty companies,
   the deferral of acquisition costs is limited based upon their
   recoverability without any consideration for anticipated
   investment income.  DPAC is charged against income ratably
   over the terms of the related policies.  For the annuity
   companies, DPAC is amortized, with interest, in relation to
   the present value of expected gross profits on the policies.

       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 the direct
   business written; (b) estimates received from ceding
   reinsurers and insurance pools and associations; (c) estimates
   of unreported losses based on past experience; (d) estimates
   based on experience of expenses for investigating and
   adjusting claims and (e) the current state of the law and
   coverage litigation.  These liabilities are subject to the
   impact of changes in claim amounts and frequency and other
   factors.  In spite of the variability inherent in such
   estimates, management believes that the liabilities for unpaid
   losses and loss adjustment expenses are adequate. 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.

       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 ordinary life, accident and
   health policies are computed using a net level premium method.
   Computations are based on anticipated investment yield
   (primarily 7%), mortality, morbidity and surrenders and
   include provisions for unfavorable deviations.  Reserves are
   modified as necessary to reflect actual experience and
   developing trends.

       Assets Held In and Liabilities Related to Separate
   Accounts  Investment annuity deposits and related liabilities
   represent primarily deposits maintained by several banks under
   a previously offered tax-deferred annuity program.  AAG
   receives an annual fee from each bank for sponsoring the
   program; if depositors elect to purchase an annuity from AAG,
   funds are transferred to AAG.
<PAGE>
       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.

                                 F-8
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

       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.  The estimate is accrued
   during the period in which the related premium is 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.

   Income Taxes  AFC and American Premier have each filed
   consolidated federal income tax returns which include all
   80%-owned U.S. subsidiaries, except for certain life insurance
   subsidiaries and their subsidiaries.  At the close of business
   on December 31, 1996, AFG contributed 81% of the common stock
   of American Premier to AFC.  Accordingly, AFC and American
   Premier will file a consolidated return for 1997.

   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.

   Benefit Plans  AFC provides retirement benefits to qualified
   employees of participating companies through contributory and
   noncontributory defined contribution plans.  Contributions to
   benefit plans are charged against earnings in the year for
   which they are declared.  Prior to 1997, both AFC and American
   Premier had contributory employee savings plans and
   noncontributory Employee Stock Ownership Retirement Plans
   ("ESORP").  Effective January 1, 1997, these ESORP plans were
   combined into a new retirement and savings plan.  Under the
   retirement portion of the plan, company contributions
   (approximately 6% of covered compensation in 1997) are
   invested primarily in securities of AFG and affiliates.  Under
   the savings portion of the plan, AFC matches a specific
   portion of employee contributions.

   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 the employees earn such benefits.
<PAGE>
   Minority Interest  For balance sheet purposes, minority
   interest represents the interests of non-controlling
   shareholders in AFC subsidiaries, including preferred
   securities issued by trust subsidiaries of AAG, and AFG's
   direct ownership interest in American Premier and AFEI.  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.

   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.

                                  F-9
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

   Issuances of Stock by Subsidiaries and Investees  Changes in
   AFC's equity in a subsidiary or an investee caused by
   issuances of the subsidiary's or investee's stock are
   accounted for as gains or losses where such issuance is not a
   part of a broader reorganization.

   Fair Value of Financial Instruments  Methods and assumptions
   used in estimating fair values are described in Note R to the
   financial statements.  These fair values represent point-in-
   time estimates of value that might not be particularly
   relevant in predicting AFC's future earnings or cash flows.

C. Acquisitions and Sales of Subsidiaries and Investees

   Millennium Dynamics, Inc.  In December 1997, AFC completed
   the sale of the assets of its software solutions and
   consulting services subsidiary, Millennium Dynamics, Inc.
   ("MDI"), to a subsidiary of Peritus Software Services, Inc.
   for $30 million in cash and 2,175,000 shares of Peritus
   common stock.  AFC recognized a pretax gain of approximately
   $50 million on the sale.

   Chiquita  During the second half of 1997, Chiquita issued
   4.6 million shares of its common stock in acquisitions of
   operating businesses.  AFC recorded a pretax gain in the
   fourth quarter of 1997 of approximately $11 million
   representing the excess of AFC's equity in Chiquita following
   the issuances of its common stock over AFC's previously
   recorded carrying value.

   Citicasters  In September 1996, AFC sold its investment in
   Citicasters to Jacor Communications for approximately
   $220 million in cash plus warrants to purchase Jacor common
   stock.  AFC realized a pretax gain of approximately
   $169 million, before minority interest of $6.5 million, on
   the sale.

   Buckeye  In March 1996, American Premier sold Buckeye
   Management Company to Buckeye's management (including an AFG
   director who resigned in March 1996) and employees for $60
   million in cash, net of transaction costs.  AFC recognized a
   $33.9 million pretax gain on the sale.

D. Segments of Operations  AFC operates its property and
   casualty insurance business in three major segments:
   nonstandard automobile, specialty lines, and commercial and
   personal lines.  AFC's annuity and life
   business primarily sells tax-deferred annuities to employees of
   primary and secondary educational institutions and hospitals.
   These insurance businesses operate throughout the United
   States.  In addition, AFC has owned significant portions of
   the voting equity securities of certain companies (investee
   corporations - see Note F).
<PAGE>
   The Financial Accounting Standards Board issued SFAS No. 131,
   "Disclosures about Segments of an Enterprise and Related
   Information", which is scheduled to become effective during
   the fourth quarter of 1998.  The implementation of SFAS No.
   131 is not expected to have a material effect on the segments
   currently disclosed by AFC.

                                 F-10
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


   The following tables (in thousands) show AFC's assets, revenues
   and operating profit (loss) by significant business segment.
   Capital expenditures, depreciation and amortization are not
   significant.  Operating profit (loss) represents total revenues
   less operating expenses.  Goodwill and its amortization have
   been allocated to the various segments to which they apply.
   General corporate assets and expenses have not been identified
   or allocated by segment.

                                               1997         1996         1995
   Assets
   Property and casualty insurance (a)  $ 7,517,856  $ 7,116,088  $ 7,443,115
   Annuities and life                     7,693,463    7,009,127    6,600,377
   Other                                    325,949      674,297      501,417
                                         15,537,268   14,799,512   14,544,909
   Investment in investees                  200,714      199,651      306,545

                                        $15,737,982  $14,999,163  $14,851,454
   Revenues (b)
   Property and casualty insurance:
     Premiums earned:
       Nonstandard automobile           $ 1,205,200  $ 1,183,098  $   954,210
       Specialty lines                    1,055,935      976,150      995,528
       Commercial and personal lines        563,217      684,776      697,512
       Other lines                               29          488        1,453
                                          2,824,381    2,844,512    2,648,703
     Investment and other income            448,849      500,897      465,998
                                          3,273,230    3,345,409    3,114,701
   Annuities and life (c)                   638,348      585,079      444,082
   Other                                    146,888      200,315       54,086
                                          4,058,466    4,130,803    3,612,869
   Equity in net earnings (losses)
     of investees                            (5,564)     (16,955)      15,237

                                        $ 4,052,902  $ 4,113,848  $ 3,628,106
<PAGE>
   Operating Profit (Loss)
   Property and casualty insurance:
     Underwriting:
       Nonstandard automobile           $    33,456  $     1,015  ($   60,316)
       Specialty lines                       10,888      154,329       50,690
       Commercial and personal lines        (33,882)     (72,513)       5,315
       Other lines (d)                      (52,021)    (163,540)     (31,721)
                                            (41,559)     (80,709)     (36,032)
     Investment and other income            311,169      359,002      357,617
                                            269,610      278,293      321,585
   Annuities and life                        93,794       77,119       79,579
   Other (e)                                (24,076)       1,086     (164,503)
                                            339,328      356,498      236,661
   Equity in net earnings (losses) of
     investees                               (5,564)     (16,955)      15,237

                                        $   333,764  $   339,543   $  251,898

   (a)  Not allocable to segments.
   (b)  Revenues include sales of products and services as well as other
          income earned by the respective segments.
   (c)  Represents primarily investment income.
   (d)  Represents primarily losses related to asbestos and
          other environmental matters ("A&E").
   (e)  Includes holding company expenses.

                                 F-11
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


E. Investments  Bonds, redeemable preferred stocks and other stocks
   at December 31, consisted of the following (in millions):

                                                      1997
                                                Held to Maturity
                                  Amortized      Market      Gross Unrealized
                                       Cost       Value      Gains     Losses
   Bonds and redeemable
    preferred stocks:
     United States Government
      and government agencies
      and authorities              $     -     $    -        $  -        $ -
     States, municipalities and
      political subdivisions           72.0        73.6        1.8        (.2)
     Foreign government                 8.3         8.9         .6         -
     Public utilities                 459.7       466.7        8.3       (1.3)
     Mortgage-backed securities       868.9       899.4       30.6        (.1)
     All other corporate            1,711.2     1,753.7       43.6       (1.1)
     Redeemable preferred stocks         -           -          -          -
                                   $3,120.1    $3,202.3      $84.9      ($2.7)

                                                        1997
                                                Available for Sale
                                  Amortized      Market      Gross Unrealized
                                       Cost       Value      Gains     Losses
   Bonds and redeemable
    preferred stocks:
     United States Government
      and government agencies
      and authorities              $  600.8    $  618.6      $ 18.1    ($  .3)
     States, municipalities and
      political subdivisions           86.7        89.3         2.6        -
     Foreign government                55.9        57.9         2.1       (.1)
     Public utilities                 359.3       374.7        15.7       (.3)
     Mortgage-backed securities     1,715.7     1,779.4        65.5      (1.8)
     All other corporate            4,336.9     4,536.9       200.0        -
     Redeemable preferred stocks       70.4        76.0         5.9       (.3)
                                   $7,225.7    $7,532.8      $309.9    ($ 2.8)

   Other stocks                    $  153.3    $  446.2      $293.7    ($  .8)

<PAGE>
                                                      1996
                                                Held to Maturity
                                  Amortized      Market      Gross Unrealized
                                      Cost        Value      Gains     Losses
   Bonds and redeemable
    preferred stocks:
     United States Government
      and government agencies
      and authorities              $     -     $     -       $   -      $  -
    States, municipalities and
     political subdivisions            80.0        79.9         1.1      (1.2)
    Foreign government                  8.5         9.0          .5        -
    Public utilities                  501.4       501.4         6.4      (6.4)
    Mortgage-backed securities        935.9       949.0        18.8      (5.7)
    All other corporate             1,965.3     1,988.8        34.8     (11.3)
    Redeemable preferred stocks          -           -           -         -

                                   $3,491.1    $3,528.1       $61.6    ($24.6)



                                                      1996
                                                Available for Sale
                                  Amortized      Market      Gross Unrealized
                                       Cost       Value      Gains     Losses
   Bonds and redeemable
    preferred stocks:
     United States Government
      and government agencies
      and authorities              $  472.2     $  475.7      $ 7.3    ($ 3.8)
     States, municipalities and
      political subdivisions           39.6         39.7         .5       (.4)
     Foreign government                94.5         94.3         .8      (1.0)
     Public utilities                 443.8        453.6       13.1      (3.3)
     Mortgage-backed securities     1,626.3      1,637.9       28.1     (16.5)
     All other corporate            3,624.4      3,733.0      122.2     (13.6)
     Redeemable preferred stocks       61.8         60.4        1.5      (2.9)
                                   $6,362.6     $6,494.6     $173.5    ($41.5)
   Other stocks                    $  142.4     $  327.7     $191.6    ($ 6.3)
<PAGE>

   The table below sets forth the scheduled maturities of bonds and
   redeemable preferred stocks based on carrying value as of
   December 31, 1997.  Data based on market value is generally the
   same.  Mortgage-backed securities had an average life of
   approximately 6.5 years at December 31, 1997.

                                                 Held to   Available
              Maturity                          Maturity    for Sale
            One year or less                          6%          3%
            After one year through five years        32          18
            After five years through ten years       30          37
            After ten years                           4          18
                                                     72          76
            Mortgage-backed securities               28          24
                                                    100%        100%

   Certain risks are inherent in connection with fixed maturity
   securities, including loss upon default, price volatility in
   reaction to changes in interest rates, and general market
   factors and risks associated with reinvestment of proceeds
   due to prepayments or redemptions in a period of declining
   interest rates.

   Included in equity securities at December 31, 1997 and 1996
   are $313 million and $220 million, respectively, of
   securities of Provident Financial Group, Inc. which
   exceeded 10% of Shareholders' Equity.

                                 F-12
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


   Realized gains (losses) and changes in unrealized appreciation
   (depreciation) on fixed maturity and equity security investments
   are summarized as follows (in thousands):

                               Fixed      Equity        Tax
                          Maturities  Securities    Effects       Total
     1997
     Realized               $ 11,542    $ 34,464  ($ 16,102)   $ 29,904
     Change in Unrealized    220,320     107,600   (114,772)    213,148

     1996
     Realized               (16,545)      13,075      8,199       4,729
     Change in Unrealized  (272,583)      70,000     70,904    (131,679)

     1995
     Realized                 77,963       6,065    (13,915)     70,113
     Change in Unrealized    810,690      43,700   (288,001)    566,389

   Transactions in fixed maturity investments included in the
   Statement of Cash Flows consisted of the following (in millions):

                                     Maturities
                                            and              Gross    Gross
                         Purchases  Redemptions     Sales    Gains   Losses

     1997
     Held to Maturity     $    5.6       $422.3  $    8.0    $  .5   ($ 1.0)
     Available for Sale    2,549.5        475.5   1,399.6     37.7    (25.7)
          Total           $2,555.1       $897.8  $1,407.6    $38.2   ($26.7)

     1996
     Held to Maturity     $  202.2       $331.0  $    9.3    $ 2.4   ($ 1.2)
     Available for Sale    1,925.8        284.8     871.8     29.6    (47.3)
          Total           $2,128.0       $615.8  $  881.1    $32.0   ($48.5)

     1995
     Held to Maturity     $  774.8       $175.2  $   12.9    $ 1.9   ($ 2.3)
     Available for Sale    1,603.6        133.3   2,297.9     88.0     (9.6)
          Total           $2,378.4       $308.5  $2,310.8    $89.9   ($11.9)

   Securities classified as "held to maturity" having an amortized cost of
   $8.2 million, $9.5 million and $14.7 million were sold for a loss of
   $170,000, $159,000 and $1.8 million in 1997, 1996 and 1995, respectively,
   due to significant deterioration in the issuers' creditworthiness.

                                 F-13
<PAGE>
          AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


F. Investment in Investee Corporations  All of the companies named
   in the following table have been subject to the rules and
   regulations of the SEC.  The market value of AFC's investment in
   Chiquita was $391 million and $306 million at December 31, 1997
   and 1996, respectively.  AFC's investment (and common stock
   ownership percentage) and equity in net earnings and losses of
   investees are stated below (dollars in thousands):
<TABLE>
<CAPTION>
                            Investment (Ownership %)      Equity in Net Earnings (Losses)
                        12/31/97         12/31/96              1997       1996       1995
  <S>                  <C>              <C>                 <C>       <C>        <C>
   Chiquita (a)         $200,714 (39%)   $199,651 (43%)     ($5,564)  ($18,415)   $ 3,628
   Citicasters (b)          -                -                 -         1,460      4,702
   American Premier(c)      -                -                 -          -         6,907

                        $200,714         $199,651           ($5,564)  ($16,955)   $15,237

  <FN>
   (a) Equity in net earnings (losses) excludes AFC's share of amounts included in
         extraordinary items.
   (b) Sold in September 1996.
   (c) Accounted for as an 81% subsidiary beginning in April 1995.
  </FN>
  </TABLE>
   Chiquita is a leading international marketer, producer and
   distributor of bananas and other quality fresh and processed
   food products.  Summarized financial information for Chiquita at
   December 31, is shown below (in millions):
                                                        1997    1996     1995

     Current Assets                                   $  783  $  844
     Non-current Assets                                1,618   1,623
     Current Liabilities                                 483     464
     Non-current Liabilities                           1,138   1,279
     Shareholders' Equity                                780     724

     Net Sales of Continuing Operations               $2,434  $2,435   $2,566
     Operating Income                                    100      84      176
     Income (Loss) from Continuing Operations            -       (28)      28
     Discontinued Operations                             -       -        (11)
     Extraordinary Loss from Debt Refinancings           -       (23)      (8)
     Net Income (Loss)                                   -       (51)       9
     Net Income (Loss) Attributable to Common Shares     (17)    (63)       1


G. Cost in Excess of Net Assets Acquired  At December 31, 1997 and
   1996, accumulated amortization of the excess of cost over net
   assets of purchased subsidiaries amounted to approximately
   $133 million and $121 million, respectively.  Amortization
   expense was $11.6 million in 1997, $10.8 million in 1996 and
   $9.2 million in 1995.
                                 F-14
<PAGE>
             AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


H. Payable to American Financial Group  Following the Mergers,
   American Premier agreed to lend up to $675 million to AFC under
   a line of credit.  Borrowings under the credit line bore
   interest at 11-5/8%.  On December 27, 1996, American Premier
   paid a dividend to AFG which consisted of the $675 million note
   receivable plus accrued interest.  Subsequently, AFG
   contributed $450 million of the note to AFC.

   Also subsequent to the Mergers, American Premier entered into
   a credit agreement with AFG under which American Premier and
   AFG made loans of up to $250 million available to each other.
   The balance outstanding under the credit line bore interest at
   a variable rate of one percent over LIBOR.

   In December 1997, AFG's credit agreements with AFC and APU
   were replaced with a ten-year reciprocal Master Credit
   Agreement among AFG, three AFG subsidiary holding companies
   including APU, AFC and AFC's direct parent, AFC Holding
   Company, under which funds are made available to each other at
   one percent over LIBOR.

   At December 31, 1997 and 1996, AFC and APU had outstanding
   borrowings due AFG and AFC Holding under the above agreements
   of $344.5 million (plus accrued interest of $8.3 million) and
   $400.4 million (plus accrued interest of $21.6 million),
   respectively.
<PAGE>
I. Other Long-Term Debt  Long-term debt consisted of the following at
   December 31, (in thousands):
                                                         1997       1996
   Holding Companies:
     AFC 9-3/4% Debentures due April 2004,
       less discount of $737 and $1,146
         (imputed rate - 9.8%)                       $ 79,792   $164,368
     APU 9-3/4% Subordinated Notes due August 1999,
       including premium of $1,224 and $1,912
       (imputed rate - 8.8%)                           92,127     93,604
     APU 10-5/8% Subordinated Notes due April 2000,
       including premium of $1,559 and $2,629
       (imputed rate - 8.8%)                           43,889     54,595
     APU 10-7/8% Subordinated Notes due May 2011,
       including premium of $1,584 and $1,642
       (imputed rate - 9.6%)                           17,586     18,496
     GAHC notes payable under bank line                45,000       -
     Other                                              8,267      8,441

                                                     $286,661   $339,504

   Subsidiaries:
     AAG notes payable under bank lines              $107,000   $ 44,700
     AAG 11-1/8% Senior Subordinated Notes
       due February 2003                               24,080     24,080
     AAG 9-1/2% Senior Notes                             -        40,845
     Notes payable secured by real estate              49,525     52,543
     Other                                             13,479     16,247

                                                     $194,084   $178,415

                                 F-15
<PAGE>
             AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


     At December 31, 1997, sinking fund and other scheduled
   principal payments on debt for the subsequent five years,
   adjusted to reflect financing transactions through February
   1998, were as follows (in thousands):

                Holding
              Companies      Subsidiaries       Total
      1998      $   -           $ 1,983      $  1,983
      1999       90,903           2,087        92,990
      2000       42,330           8,803        51,133
      2001          -            38,509        38,509
      2002       50,399          61,440       111,839

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

   At December 31, 1997, the weighted average interest rate on
   amounts borrowed under Great American Holding Corporation's
   ("GAHC") bank credit line was 6.81%.  In February 1998, AFC
   entered into a new unsecured credit agreement with a group of
   banks and the GAHC and APU agreements were terminated.  Under
   the terms of the new agreement, AFC can borrow up to
   $300 million through December 2002.  Borrowings bear interest
   at floating rates based on prime or LIBOR.

   At December 31, 1997 and 1996, the weighted average interest
   rate on amounts borrowed under AAG's bank credit lines was
   6.80% and 6.68%, respectively.  In January 1998, AAG replaced
   its existing bank lines with a new $200 million unsecured
   credit agreement.  Loans under the credit agreement mature
   from 2000 to 2003 and bear interest at floating rates based
   on prime or LIBOR.  In February 1998, AAG borrowed
   $50 million under the line and retired its 11-1/8% Notes
   (including $24.3 million principal amount held by AAG
   entities).

   Significant retirements of long-term debt since January 1,
   1996, have been as follows (in millions):
                              Year      Principal      Cost

     AFC Debentures           1996         $138.2    $147.9
                              1997           85.0      96.7

     American Premier Notes   1996          160.1     177.2
                              1997           11.3      12.5

     AAG Notes                1996           78.0      84.2
                              1997           40.8      42.5
                              1998 (2 mos)   24.1      24.8
<PAGE>
   Cash interest payments of $98 million, $83 million and
   $137 million were made on long-term borrowings in 1997,
   1996 and 1995, respectively.

J. Minority Interest  Minority interest in AFC's balance sheet
   is comprised of the following (in thousands):

                                             1997      1996
      Interest of AFG (parent) and
        non-controlling shareholders
        in subsidiaries' common stock    $284,619  $231,858
      Preferred securities issued by
        subsidiary trusts                 225,000    75,000

                                         $509,619  $306,858
                                 F-16
<PAGE>
             AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


   Trust Issued Preferred Securities  Wholly-owned subsidiary trusts
   of AAG have issued $225 million of preferred securities and, in
   turn, purchased $225 million of newly-authorized AAG subordinated
   debt issues which provide interest and principal payments to fund
   the respective trusts' obligations.  The preferred securities are
   mandatorily redeemable upon maturity or redemption of the
   subordinated debt.

   The preferred securities are summarized as follows:

    Date of                                             Optional
    Issuance       Issue (Maturity Date)       Amount   Redemption Dates

    November 1996  9-1/4% TOPrS (2026)    $75,000,000   On or after 11/7/2001
    March 1997     8-7/8% Pfd (2027)       75,000,000   On or after 3/1/2007
    May 1997       7-1/4% ROPES (2041)     75,000,000   Prior to 9/28/2000 and
                                                           after 9/28/2001

   AAG effectively provides unconditional guarantees of its trusts'
   obligations.

   Minority Interest Expense  Minority interest expense is comprised
   of (in thousands):

                                                  1997      1996      1995
      Interest of AFG (parent) and
        non-controlling shareholders
        in earnings of subsidiaries            $29,978   $53,717   $28,165
      Accrued distributions on trust issued
        preferred securities                    15,499     1,031      -

                                               $45,477   $54,748   $28,165

K. 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
   December 31, 1997, the outstanding 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
       $25.75 per share beginning December 2005 declining to
       $25.00 at December 2007; 2,886,161 shares (stated value
       $72.2 million) outstanding at December 31, 1997.

   At December 31, 1996, AFC's outstanding 11,900,725 shares of
   Series F Preferred Stock had a stated value of
   $145.4 million; its 1,964,158 shares of Series G Preferred
   Stock had a stated value of $17.4 million.
<PAGE>
   In December 1997, AFC retired all shares of its Series F and
   G Preferred Stock in exchange for approximately $244 million
   in cash and 2,886,161 million shares of the Series J
   Preferred Stock.  AFC recognized a charge to retained
   earnings of $153.3 million representing the excess of total
   consideration paid over the stated value of the preferred
   stock retired.

   In December 1996, AFC redeemed 1.6 million shares of its
   Series F Preferred Stock for $31.9 million and, in October
   1996, purchased 250,000 shares of Series F from its ESORP for
   $5.0 million.  In December 1996, AFC issued 1.6 million
   shares of its Series G Preferred Stock to its ESORP for
   $16.8 million.  During 1995, AFC retired its mandatory
   redeemable preferred stock for an aggregate of $2.9 million.
                                 F-17
<PAGE>
             AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


L. Common Stock  At December 31, 1997, American Financial Group
   owned all of the outstanding shares of AFC's Common Stock.
   The number of shares of AFC Common Stock outstanding were
   reduced from 45,000,000 to 10,593,000 in connection with the
   retirement of Series F and G Preferred Stock in December 1997.

M. Income Taxes  The following is a reconciliation of income
   taxes at the statutory rate of 35% and income taxes as shown
   in the Statement of Earnings (in thousands):

                                                 1997       1996       1995
    Earnings before income taxes and
      extraordinary items                    $333,764   $339,543   $251,898
    Extraordinary items before income taxes   (11,201)   (34,892)     1,551

    Adjusted earnings before income taxes    $322,563   $304,651   $253,449

    Income taxes at statutory rate           $112,897   $106,628   $ 88,707
    Effect of:
      Minority interest                        10,168     18,507      9,533
      Losses utilized                          (3,164)   (43,789)   (40,292)
      Amortization of intangibles               3,362      3,065      3,015
      Foreign income taxes                      2,954      3,474        359
      State income taxes                       (2,739)     4,140         81
      Dividends received deduction             (2,002)    (7,450)    (7,823)
      Tax exempt interest                        (384)      (597)      (897)
      Other                                        81     (1,323)     3,483
    Total provision                           121,173     82,655     56,166
    Amounts applicable to
      extraordinary items                       4,054      7,003        281
    Provision for income taxes as shown
      on the Statement of Earnings           $125,227   $ 89,658   $ 56,447
<PAGE>
   Adjusted earnings before income taxes consisted of the following
   (in thousands):
                                                 1997       1996       1995
    Subject to tax in:
      United States                          $331,855   $318,919   $256,417
      Foreign jurisdictions                    (9,292)   (14,268)    (2,968)

                                             $322,563   $304,651   $253,449

   The total income tax provision consists of (in thousands):

                                                 1997       1996       1995
      Current taxes (credits):
        Federal                              $ 27,875   $ 22,450   $ 38,512
        Foreign                                  -        (1,735)    (1,213)
        State                                  (2,544)     6,369        124
      Deferred taxes:
        Federal                                96,301     55,250     18,191
        Foreign                                  (459)       321        552

                                             $121,173   $ 82,655   $ 56,166

                                 F-18
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


   For income tax purposes, certain members of the AFC consolidated
   tax group had the following carryforwards available at Decem
   ber 31, 1997 (in millions):

                                   Expiring        Amount
                    {             1998 - 2002        $ 35
      Operating Loss{             2003 - 2007          95
                    {             2008 - 2012          60
      Capital Loss                       1999          91
      Other - Tax Credits                              23

   Deferred income tax assets and liabilities reflect temporary
   differences between the carrying amounts of assets and
   liabilities recognized for financial reporting purposes and
   the amounts recognized for tax purposes.  The significant
   components of deferred tax assets and liabilities included in
   the Balance Sheet at December 31, were as follows (in millions):

                                             1997        1996
     Deferred tax assets:
       Net operating loss carryforwards    $ 66.6      $ 83.7
       Capital loss carryforwards            32.0        68.2
       Insurance claims and reserves        287.5       289.8
       Other, net                           148.8       142.2
                                            534.9       583.9
       Valuation allowance for deferred
         tax assets                         (97.9)     (131.9)
                                            437.0       452.0
     Deferred tax liabilities:
       Deferred acquisition costs          (127.4)     (124.9)
       Investment securities               (268.2)     (189.8)
                                           (395.6)     (314.7)

     Net deferred tax asset                $ 41.4      $137.3

   The gross deferred tax asset has been reduced by a valuation
   allowance based on an analysis of the likelihood of
   realization.  Factors considered in assessing the need for a
   valuation allowance include: (i) recent tax returns, which
   show neither a history of large amounts of taxable income nor
   cumulative losses in recent years, (ii) opportunities to
   generate taxable income from sales of appreciated assets, and
   (iii) the likelihood of generating larger amounts of taxable
   income in the future.  The likelihood of realizing this asset
   will be reviewed periodically; any adjustments required to
   the valuation allowance will be made in the period in which
   the developments on which they are based become known.  The
   aggregate valuation allowance decreased by $34 million in
   1997 due primarily to the expiration of American Premier's
   loss carryforwards.
<PAGE>
   Cash payments for income taxes, net of refunds, were
   $43.7 million, $40.2 million and $14.8 million for 1997, 1996
   and 1995, respectively.

                                 F-19
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


N. Extraordinary Items  Extraordinary items represent AFC's
   proportionate share of gains and losses related to debt
   retirements by the following companies.  Amounts shown are
   net of minority interest and income tax benefits (in
   thousands):
                                  1997       1996       1995
      Holding Companies:
        AFC (parent)           ($5,395)  ($ 9,672)   ($1,713)
        APU (parent)              (502)    (2,636)     7,102
        GAHC                      -          -          (611)
      Subsidiaries:
        AAG                     (1,250)    (7,159)      (201)
        Other                     -            57        -
      Investee:
        Chiquita                  -        (8,479)    (2,745)

                               ($7,147)  ($27,889)    $1,832

O. Commitments and Contingencies  Loss accruals have been recorded
   for various environmental and occupational injury and disease
   claims and other contingencies arising out of the railroad
   operations disposed of by American Premier's predecessor, Penn
   Central Transportation Company ("PCTC"), prior to its bankruptcy
   reorganization in 1978.  Any ultimate liability arising
   therefrom in excess of previously established loss accruals
   would normally be attributable to pre-reorganization events and
   circumstances and accounted for as a reduction in capital
   surplus.  However, under purchase accounting in connection with
   the Mergers, any such excess liability will be charged to
   earnings in AFC's financial statements.

   American Premier's liability for environmental claims
   ($39.5 million at December 31, 1997) consists of a number of
   proceedings and claims seeking to impose responsibility for
   hazardous waste remediation costs at certain railroad sites
   formerly owned by PCTC and certain other sites where hazardous
   waste was allegedly generated by PCTC's railroad operation.  It
   is difficult to estimate remediation costs for a number of
   reasons, including the number and financial resources of other
   potentially responsible parties, the range of costs for
   remediation alternatives, changing technology and the time
   period over which these matters develop.  American Premier's
   liability is based on information currently available and is
   subject to change as additional information becomes available.
<PAGE>
   American Premier's liability for occupational injury and disease
   claims of $58.1 million (included in other liabilities) at
   December 31, 1997, includes pending and expected claims by
   former employees of PCTC for injury or disease allegedly caused
   by exposure to excessive noise, asbestos or other substances in
   the railroad workplace.  Anticipated recoveries of $35.2 million
   on these liabilities are included in other assets.  Recorded
   amounts are based on the accumulation of estimates of reported
   and unreported claims and related expenses and estimates of
   probable recoveries from insurance carriers.

   AFC has accrued approximately $14.2 million at December 31,
   1997, for environmental costs and certain other matters
   associated with the sales of former operations.

   In management's opinion, the outcome of the items discussed
   under "Uncertainties" in Management's Discussion and Analysis
   and the above claims and contingencies will not, individually or
   in the aggregate, have a material adverse effect on AFC's
   financial condition or results of operations.

                                 F-20
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


P. Quarterly Operating Results (Unaudited)  The operations of
   certain of AFC's business segments are seasonal in nature.
   While insurance premiums are recognized on a relatively level
   basis, claim losses related to adverse weather (snow, hail,
   hurricanes, tornadoes, etc.) may be seasonal.  Historically,
   Chiquita's operations are significantly stronger in the first
   and second quarters than in the third and fourth quarters.
   Quarterly results necessarily rely heavily on estimates.
   These estimates and certain other factors, such as the nature
   of investees' operations and discretionary sales of assets,
   cause the quarterly results not to be necessarily indicative
   of results for longer periods of time.  The following are
   quarterly results of consolidated operations for the two
   years ended December 31, 1997 (in millions):

                                  1st       2nd       3rd      4th      Total
                              Quarter   Quarter   Quarter   Quarter      Year
      1997
      Revenues               $  945.6  $  987.5  $1,034.7  $1,085.1  $4,052.9
      Earnings before
        extraordinary items      62.0      60.7      34.9      50.9     208.5
      Extraordinary items         (.1)      -        (6.9)      (.1)     (7.1)
      Net earnings               61.9      60.7      28.0      50.8     201.4

      1996
      Revenues               $1,030.2  $1,032.8  $1,163.5  $  887.3  $4,113.8
      Earnings (loss) before
        extraordinary items      78.6      58.5     119.2      (6.4)    249.9
      Extraordinary items        (7.4)    (10.0)     (8.3)     (2.2)    (27.9)
      Net earnings (loss)        71.2      48.5     110.9      (8.6)    222.0

   In the fourth quarter of 1997, AFC increased California
   workers' compensation reserves by approximately $25 million
   due to increased claims severity related to business written
   in 1996 and 1997.  The fourth quarter of 1997 also includes
   income of $46.3 million (included in "other income") from the
   sale of development rights in New York City partially offset
   by a $9.0 million charge related to insurance recoverables of
   American Premier's prior railroad business.  In the third
   quarter of 1996, AFC increased A&E reserves by recording a
   non-cash pretax charge of $80 million and recorded losses due
   to Hurricane Fran of approximately $30 million.
<PAGE>
   During the past two years, AFC has continued a strategy of
   disposing of non-core investments.  Sales of significant
   affiliates have included the following:  MDI (December 1997);
   Citicasters (September 1996); and Buckeye (March 1996).  See
   Note C for a more detailed description of these and other
   transactions.  Sales of subsidiaries in 1997 also includes a
   fourth quarter pretax charge of $17 million relating to
   operations expected to be sold or otherwise disposed of in
   1998.  Realized gains (losses) on sales of securities and
   affiliates amounted to (in millions):

                    1st       2nd      3rd      4th     Total
                Quarter   Quarter  Quarter  Quarter      Year

      1997        $ 2.5     $4.2    $ 29.7    $54.6    $ 91.0
      1996         52.6      5.7     172.5    (28.3)    202.5

                                 F-21
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Q. Insurance  Securities owned by insurance subsidiaries having
   a carrying value of approximately $1.4 billion at
   December 31, 1997, were on deposit as required by regulatory
   authorities.

   Insurance Reserves  The liability for losses and loss
   adjustment expenses for certain long-term scheduled payments
   under workers' compensation, auto liability and other
   liability insurance has been discounted at rates ranging from
   4% to 8%.  As a result, the total liability for losses and
   loss adjustment expenses at December 31, 1997, has been
   reduced by $60 million.

   The following table provides an analysis of changes in the
   liability for losses and loss adjustment expenses, net of
   reinsurance (and grossed up), over the past three years on a
   GAAP basis (in millions):

                                                1997     1996     1995

     Balance at beginning of period           $3,404   $3,393   $2,187

     Reserves of American Premier at date
       of the Mergers                           -        -       1,090

     Provision for losses and loss adjustment
       expenses occurring in the current year  2,045    2,179    2,116
     Net increase (decrease) in provision
       for claims occurring in prior years        31      (48)    (139)
                                               2,076    2,131    1,977
     Payments for losses and loss adjustment
       expenses occurring during:
         Current year                           (840)    (999)    (987)
         Prior years                          (1,151)  (1,121)    (874)
                                              (1,991)  (2,120)  (1,861)

     Balance at end of period                 $3,489   $3,404   $3,393

     Add back reinsurance recoverables           736      720      704

     Unpaid losses and loss adjustment
       expenses included in Balance Sheet,
       gross of reinsurance                   $4,225   $4,124   $4,097
<PAGE>
   Net Investment Income  The following table shows (in millions)
   investment income earned and investment expenses incurred by
   AFC's insurance companies.

                                                1997     1996     1995
     Insurance group investment income:
       Fixed maturities                       $830.6   $817.8   $727.3
       Equity securities                         6.4      8.2      5.3
       Other                                    10.6     13.5      7.9
                                               847.6    839.5    740.5
     Insurance group investment expenses (*)   (37.3)   (38.5)   (33.8)
                                              $810.3   $801.0   $706.7

     (*) Included primarily in "Other operating and general
         expenses" in the Statement of Earnings.

                                 F-22
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


   Statutory Information  AFC's insurance subsidiaries are required
   to file financial statements with state insurance regulatory
   authorities prepared on an accounting basis prescribed or
   permitted by such authorities (statutory basis).  Net earnings and
   policyholders' surplus on a statutory basis for the insurance
   subsidiaries were as follows (in millions):
                                                            Policyholders'
                                         Net Earnings           Surplus
                                      1997   1996   1995      1997    1996

     Property and casualty companies  $159   $276   $200    $1,916  $1,659
     Life insurance companies           74     67     76       324     287

   Reinsurance  In the normal course of business, AFC's
   insurance subsidiaries assume and cede reinsurance with other
   insurance companies.  The following table shows (in millions)
   (i) amounts deducted from property and casualty premiums in
   connection with reinsurance ceded, (ii) amounts included in
   income for reinsurance assumed and (iii) reinsurance
   recoveries deducted from losses and loss adjustment expenses.

                                             1997    1996    1995
     Reinsurance ceded to:
       Non-affiliates                        $614    $518    $476
       Affiliates                              -       -       33
     Reinsurance assumed - including
       involuntary pools and associations      89      58      93
     Reinsurance recoveries                   296     306     304

R. Additional Information  Total rental expense for various
   leases of office space, data processing equipment and
   railroad rolling stock was $36 million, $34 million and
   $35 million for 1997, 1996 and 1995, respectively.  Sublease
   rental income related to these leases totaled $5.4 million in
   1997, $6.1 million in 1996 and $6.2 million in 1995.

   Future minimum rentals, related principally to office space
   and railroad rolling stock, required under operating leases
   having initial or remaining noncancelable lease terms in
   excess of one year at December 31, 1997, were as follows:
   1998 - $37 million; 1999 - $31 million; 2000 - $22 million;
   2001 - $18 million; 2002 - $13 million; and $30 million
   thereafter.  At December 31, 1997, minimum sublease rentals
   to be received through the expiration of the leases
   aggregated $14 million.

   Other operating and general expenses included charges for
   possible losses on agents' balances, reinsurance recoverables
   and other receivables in the following amounts:  1997 -
   $7.6 million; 1996 - $0; and 1995 - $0.  The aggregate
   allowance for such losses amounted to approximately
   $131 million and $123 million at December 31, 1997 and 1996,
   respectively.
                                 F-23
<PAGE>
           AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


   Fair Value of Financial Instruments  The following table
   presents (in millions) the carrying value and estimated fair
   value of AFC's financial instruments at December 31.

                                        1997                  1996
                                Carrying     Fair     Carrying      Fair
                                   Value    Value        Value     Value
     Assets:
     Bonds and redeemable
       preferred stocks          $10,653  $10,735      $ 9,986   $10,023
     Other stocks                    446      446          328       328
     Investment in investee
       corporations                  201      391          200       306

     Liabilities:
     Annuity benefits
       accumulated               $ 5,528  $ 5,319      $ 5,366   $ 5,180
     Long-term debt:
       Holding companies             287      301          340       362
       Subsidiaries                  194      195          178       183
     Trust preferred securities      225      230           75        77

     AFC Preferred Stock              72       74          163       264

   When available, fair values are based on prices quoted in the
   most active market for each security.  If quoted prices are
   not available, fair value is estimated based on present
   values, discounted cash flows, fair value of comparable
   securities, or similar methods.  The fair value of the
   liability for annuities in the payout phase is assumed to be
   the present value of the anticipated cash flows, discounted
   at current interest rates.  Fair value of annuities in the
   accumulation phase is assumed to be the policyholders' cash
   surrender amount.

   Financial Instruments with Off-Balance-Sheet Risk  On
   occasion, AFC and its subsidiaries have entered into
   financial instrument transactions which may present off-
   balance-sheet risks of both credit and market risk nature.
   These transactions include commitments to fund loans, loan
   guarantees and commitments to purchase and sell securities or
   loans.  At December 31, 1997, AFC and its subsidiaries had
   commitments to fund credit facilities and contribute limited
   partnership capital totaling $29 million.
<PAGE>
   Restrictions on Transfer of Funds and Assets of Subsidiaries
   Payments of dividends, loans and advances by AFC's
   subsidiaries are subject to various state laws, federal
   regulations and debt covenants which limit the amount of
   dividends, loans and advances that can be paid.  Under
   applicable restrictions, the maximum amount of dividends
   available to AFC in 1998 from its insurance subsidiaries
   without seeking regulatory clearance is approximately
   $221 million.  Total "restrictions" on intercompany transfers
   from AFC's subsidiaries cannot be quantified due to the
   discretionary nature of the restrictions.

   Benefit Plans  AFC expensed approximately $21 million in
   1997, $17 million in 1996 and $16 million in 1995 for
   contributions to its retirement and employee savings plans.

   Transactions With Affiliates  In December 1997, AFC
   recognized a gain of $32.5 million on the sale of development
   rights to AFG at their appraised value.  In 1995, a
   subsidiary of AFC sold a house to its Chairman for its
   appraised value of $1.8 million.

                                 F-24
<PAGE>
                               PART IV

                               ITEM 14

       Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)  Documents filed as part of this Report:
       1. Financial Statements are included in Part II, Item 8.

       2. Financial Statement Schedules:
           A. Selected Quarterly Financial Data is included in Note P
              to the Consolidated Financial Statements.
           B. Schedules filed herewith for 1997, 1996 and 1995:
                                                                  Page
              I - Condensed Financial Information of Registrant   S-2

              V - Supplemental Information Concerning
                  Property-Casualty Insurance Operations          S-4

            All other schedules for which provisions are made in the
            applicable regulation of the Securities and Exchange
            Commission have been omitted as they are not applicable,
            not required, or the information required thereby is set
            forth in the Financial Statements or the notes thereto.

       3. Exhibits - see Exhibit Index on page E-1.

(b) Reports on Form 8-K:  None

                                 S-1
<PAGE>
             AMERICAN FINANCIAL CORPORATION - PARENT ONLY
      SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                            (In Thousands)
_____________________________________________________________________

                       Condensed Balance Sheet

                                                      December 31,
Assets:                                             1997         1996
 Cash and short-term investments              $   10,793   $   46,493
 Investment in securities                            908      100,871
 Receivables from affiliates                     577,661      606,416
 Investment in subsidiaries                    1,960,328    1,494,447
 Investment in investees                          22,680       22,647
 Other assets                                      9,550        7,807

                                              $2,581,920   $2,278,681
Liabilities and Capital:
 Accounts payable, accrued expenses and other
   liabilities                                $   95,513   $   37,156
 Payable to affiliates                         1,004,865      791,821
 Long-term debt                                   88,059      172,809
 Shareholders' equity                          1,393,483    1,276,895

                                              $2,581,920   $2,278,681


<PAGE>
                   Condensed Statement of Earnings

                                                  Year ended December 31,
Income:                                          1997       1996       1995
 Dividends from:
   Subsidiaries                              $  1,247   $861,178   $195,578
   Investees                                      177        177      1,012
                                                1,424    861,355    196,590
 Equity in undistributed earnings
   of subsidiaries and investees              358,816   (470,879)   154,346
 Realized gains (losses) on sales of:
   Securities                                  (2,618)       963      2,389
   Investees                                      421     33,950     (5,034)
   Subsidiaries                                   731       -          -
 Investment and other income                   55,404     46,980     35,226
                                              414,178    472,369    383,517
Costs and Expenses:
 Interest charges on intercompany borrowings   28,772     81,623      4,198
 Interest charges on other borrowings          15,250     21,796     86,655
 Other operating and general expenses          36,392     29,407     40,766
                                               80,414    132,826    131,619
Earnings before income taxes and
 extraordinary items                          333,764    339,543    251,898
Provision for income taxes                    125,227     89,658     56,447

Earnings before extraordinary items           208,537    249,885    195,451

Extraordinary items - gain (loss) on
  prepayment of debt                           (7,147)   (27,889)     1,832

Net Earnings                                 $201,390   $221,996   $197,283

                                 S-2
<PAGE>
             AMERICAN FINANCIAL CORPORATION - PARENT ONLY
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - CONTINUED
                            (In Thousands)

______________________________________________________________________
                   Condensed Statement of Cash Flows


                                                     Year ended December 31,
                                                     1997      1996      1995
Operating Activities:
  Net earnings                                   $201,390  $221,996  $197,283
  Adjustments:
    Extraordinary items                             7,147    27,889    (1,832)
    Equity in earnings of subsidiaries           (224,949) (291,270) (235,448)
    Equity in net (earnings) losses of investees      212       379    (4,254)
    Depreciation and amortization                   1,086       505       492
    Realized losses (gains) on sales of
      subsidiaries and investments                  2,262   (34,913)    2,797
    Change in receivables from and payables
      to affiliates                                69,603   (10,497) (103,634)
    Increase (decrease) in payables                57,017    12,790   (50,718)
    Dividends from subsidiaries and investees       1,424   105,485   166,337
    Other                                             841     7,522    38,421
                                                  116,033    39,886     9,444
Investing Activities:
  Purchases of subsidiaries and other
    investments                                  (122,969)  (43,491) (154,404)
  Sales of subsidiaries and other investments     143,728   104,967    46,831
  Other, net                                          250       265       (73)
                                                   21,009    61,741  (107,646)
Financing Activities:
  Additional long-term borrowings                     150        75    98,828
  Reductions of long-term debt                    (94,049) (177,899) (252,880)
  Borrowings from affiliates                      315,000   407,500   785,876
  Repayments of borrowings from affiliates       (153,500) (263,564) (523,197)
  Issuance of Preferred Stock                        -       16,800      -
  Repurchases of Preferred Stock                 (243,939)  (36,912)   (2,880)
  Exercise of stock options                          -         -        8,721
  Capital contributions from parent                18,667    18,666     9,333
  Cash dividends paid                             (15,071)  (24,898)  (25,397)
                                                 (172,742)  (60,232)   98,404

Net Increase (Decrease) in Cash and
  Short-term Investments                          (35,700)   41,395       202

Cash and short-term investments at beginning
  of period                                        46,493     5,098     4,896

Cash and short-term investments at end
  of period                                      $ 10,793  $ 46,493  $  5,098

                                 S-3
<PAGE>
                          AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES
                          SCHEDULE V - SUPPLEMENTAL INFORMATION CONCERNING
                               PROPERTY-CASUALTY INSURANCE OPERATIONS
                                THREE YEARS ENDED DECEMBER 31, 1997
                                           (IN MILLIONS)


  COLUMN A     COLUMN B     COLUMN C      COLUMN D     COLUMN E     COLUMN F
                              (a)
                          RESERVES FOR
               DEFERRED   UNPAID CLAIMS     (b)
AFFILIATION     POLICY     AND CLAIMS     DISCOUNT       (c)
   WITH      ACQUISITION   ADJUSTMENT   DEDUCTED IN    UNEARNED      EARNED
REGISTRANT      COSTS       EXPENSES      COLUMN C     PREMIUMS     PREMIUMS

CONSOLIDATED PROPERTY-CASUALTY ENTITIES (d)

  1997          $260        $4,225         $60          $1,329       $2,824

  1996          $257        $4,124         $64          $1,248       $2,845

  1995                                                               $2,649


          COLUMN G         COLUMN H          COLUMN I      COLUMN J    COLUMN K
                       CLAIMS AND CLAIM
                      ADJUSTMENT EXPENSES   AMORTIZATION     PAID
                      INCURRED RELATED TO   OF DEFERRED     CLAIMS
           NET                                POLICY      AND CLAIM
         INVESTMENT    CURRENT      PRIOR   ACQUISITION   ADJUSTMENT   PREMIUM
          INCOME         YEARS      YEARS      COST        EXPENSE     WRITTEN

CONSOLIDATED PROPERTY-CASUALTY ENTITIES (d)

  1997      $316        $2,045      $  31       $620        $1,991     $2,858


  1996      $335        $2,179      ($ 48)      $628        $2,120     $2,788


  1995      $303        $2,116      ($139)      $577        $1,861     $2,688


(a)  Grossed up for reinsurance recoverables of $736 and $720 at December 31,
     1997 and 1996, respectively.
(b)  Discounted at rates ranging from 4% to 8%.
(c)  Grossed up for prepaid reinsurance premiums of $189 and $153 at
     December 31, 1997 and 1996, respectively.
(d)  Includes American Premier's Insurance Group after April 1, 1995.

<PAGE>
                               Signatures

    Pursuant to the requirements of Section 13 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

Signed:  March 26, 1998              BY:s/Carl H. Lindner
                                          Carl H. Lindner
                                          Chairman of the Board and
                                            Chief Executive Officer



    Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated:


      Signature                    Capacity                  Date



s/Carl H. Lindner             Chairman of the Board     March 26, 1998
  Carl H. Lindner               of Directors


s/Carl H. Lindner, III        Director                  March 26, 1998
  Carl H. Lindner, III


s/Theodore H. Emmerich        Director*                 March 26, 1998
  Theodore H. Emmerich


s/James E. Evans              Director                  March 26, 1998
  James E. Evans


s/S. Craig Lindner            Director                  March 26, 1998
  S. Craig Lindner


s/William R. Martin           Director*                 March 26, 1998
  William R. Martin


s/Fred J. Runk                Senior Vice President and March 26, 1998
  Fred J. Runk                  Treasurer (principal
                                financial and accounting
                                officer)


* Member of the Audit Committee
<PAGE>

                          INDEX TO EXHIBITS

                    AMERICAN FINANCIAL CORPORATION


Number            Exhibit Description

  3(a)    Amended Articles of Incorporation             ____

  3(b)    Amended Code of Regulations                   ____


  4       Instruments defining the        The rights of holders of
          rights of security holders.     Registrant's Preferred Stock are
                                          defined in the Articles of Incor-
                                          poration.  Registrant has no out-
                                          standing debt issues exceeding
                                          10% of the assets of Registrant
                                          and consolidated subsidiaries.

 10(a)    Nonqualified Auxiliary RASP                   ____

 10(b)    1997 Bonus Plan.                              ____

 12       Computation of ratios of earnings
          to fixed charges and fixed charges
          and preferred dividends.                      ____

 21       Subsidiaries of the Registrant.               ____

 27       Financial data schedule.                      (**)



(*)   Incorporated herein by reference.
(**)  Copy included in Report filed electronically with the Securities
      and Exchange Commission.
                                 E-1