Exhibit 99.01

# Press Release:

For Immediate Release

KMG America Reports Fourth Quarter
2005 Net Income of $0.07 Per Share
KMA Will Host an Investor Web Cast Tomorrow, Thursday,
March 9th at 9:00 A.M. EST

Minneapolis, MN, March 8, 2006 
KMG America Corporation the Company (NYSE: KMA) today reported net income for
the fourth quarter ended December 31, 2005 of $1.6 million, or $0.07 per diluted share,
compared to net income for the third quarter of 2005 of $1.3 million, or $0.06 per diluted
share, and fourth quarter 2004 net income of $0.9 million for the predecessor company
Kanawha Insurance Company, acquired in late December 2004. Fourth quarter 2005 net income
includes a $0.2 million favorable cumulative effect of an accounting change, net of tax,
resulting from switching from the cost basis to the equity basis of accounting for an
investment.

Fourth quarter 2005 operating income
(see discussion of non-GAAP financial measures below) was $1.5 million, or $0.07 per
diluted share, compared to operating income of $1.2 million, or $0.06 per diluted share,
in the third quarter of 2005 and $1.7 million, or $0.08 per diluted share, in the fourth
quarter of 2004 on a pro forma basis (pro forma operating income in the fourth quarter of
2004 is adjusted to reflect the application of purchase accounting consistent with that
earnings measurement basis).

For the full year 2005, KMA reported
net income of $4.7 million, or $0.21 per diluted share, compared to net income for the
full year 2004 of $6.2 million for the Kanawha operations. On an operating income basis,
KMA reported $4.4 million, or $0.20 per diluted share, for the full year of 2005 compared
to operating income of $10.7 million, or $0.49 per diluted share, for the full year of
2004 on a pro forma basis for the Kanawha operations.

KMG Americas Chief Executive
Officer, Kenneth Kuk, commented, Our fourth quarter and full year earnings results
are in line with the consensus analyst estimate. The operating earnings related to the KMG
America new activity for the fourth quarter were essentially flat with the third quarter
as incremental premiums largely offset increases in expenses. Looking ahead, we would
expect operating results to improve as incremental revenues outpace expenses.

Mr.    
          Kuk added, KMG America has made significant progress in our first year as
          a public company.  We have established ourselves as a credible player in
          the benefits marketplace with a strong and growing national sales organization
          and a respected administrative platform.  Our geographic reach and array of
          product offerings are far more robust than only a few months ago and our unique
          multiple product strategy is being embraced by the employee benefits
          market.  However, so far we have not been able to achieve full margins on
          sales through February 2006.

2006 OUTLOOK
Though KMG America does not provide
formal financial guidance to its investors, in assessing the Companys outlook for
2006 and beyond, management believes certain factors must be considered by investors as
they will likely affect expected future financial performance, including net income and
earnings per share. These factors include unanticipated delays in state approvals for new
products and the resulting product mix and reinsurance levels on recent sales which will
impact both revenue and earnings growth throughout 2006 and into 2007. As a result of
these and other factors, the Company believes that its 2006 operating income per share
will fall below the low end of the current range of analysts estimates, with an
expected range of $0.35 to $0.40 per share. Management will expand on this topic during
its web cast tomorrow, March 9, at 9:00 a.m. EST. The web cast and replay will be
available via the following links: www.kmgamerica.com, analyst/investor tab 
for all investors; www.streetevents.com for institutional investors;
www.fulldisclosure.com for retail investors.

FOURTH QUARTER FINANCIAL
RESULTS
Fourth quarter 2005 operating income
increased to $1.5 million compared to third quarter 2005 operating income of $1.2 million
due primarily to improved claims experience in the legacy worksite and acquired segments,
partially offset by increased expenses related to the KMG America new activity. Fourth
quarter 2005 operating income declined compared to fourth quarter 2004 pro forma operating
income of $1.7 million due primarily to increased expenses associated with the KMG America
new activity and higher claims, which were largely offset by higher investment income and
incremental margins related to sales from the new KMG America distribution channel.

After-tax operating losses attributed
to the new KMG America growth initiatives were $2.2 million in both the fourth and third
quarters of 2005, respectively, while the fourth quarter of 2004 included a loss of $0.7
million. The operating losses are due primarily to the incremental expenses related to
building the Companys new national sales and underwriting organization, and the
additional costs and infrastructure required to operate as a public company. These new
expenses (before deferrals of acquisition costs related to voluntary product sales)
totaled $4.4 million and $3.9 million in the fourth and third quarters of 2005,
respectively, and $1.1 million in the fourth quarter of 2004. Largely offsetting these
increased expenses is the emergence of incremental direct premiums related to the sales
activity from the new KMG America distribution channel of $2.3 million and $1.4 million in
the fourth and third quarters of 2005, respectively.

1

---

Excluding the operating results
attributable to new KMG America growth initiatives, fourth quarter 2005 operating income
would have improved to $3.7 million, or $0.17 per diluted share, compared to $3.5 million,
or $0.16 per diluted share, in the third quarter 2005, and fourth quarter 2004 pro forma
operating income of $2.4 million, or $0.11 per diluted share. The Company believes that
excluding the earnings results of the KMG America new activity provides a more meaningful
comparison of the trends in earnings produced by Kanawhas legacy business, which
serves to fund the initial expenses associated with building the new sales and
underwriting organization and the infrastructure needed to operate as a public company.
The more notable earnings drivers are discussed below where the fourth quarter of 2005
results are compared to the third quarter of 2005 results.

Premium Revenue
Premiums for the fourth quarter of
2005 increased to $27.5 million, compared to $26.4 million in the third quarter of 2005.
The increase is primarily due to incremental premiums related to the new KMG America sales
distribution channel that produced $2.3 million of new direct earned premiums ($1.8
million net of reinsurance) in the fourth quarter of 2005 compared to $1.4 million of new
direct earned premiums ($1.0 million net of reinsurance) in the third quarter of 2005.

Investment Income
Investment income in the fourth
quarter of 2005 increased modestly to $7.2 million, compared to $7.1 million in the third
quarter of 2005. The investment portfolio yield in the fourth quarter of 2005 averaged
4.88%, based on average cash and invested assets, an improvement of 7 basis points from
the 4.81% average yield reported in the third quarter of 2005. As a result of the capital
raised in the IPO in late December 2004 and other cash raised by Kanawha from targeted
dispositions of certain securities in its investment portfolio late in the third quarter
of 2004, the Company had total cash and cash equivalents of about $130 million at the end
of 2004. Throughout 2005, the Company remained very liquid, with significant investments
in short-term instruments as a result of our decision to selectively invest when rates
have risen. Compared to year-end 2005, KMA is now nearly fully invested.

Policyholder Benefits
Policyholder benefits for the fourth
quarter of 2005 decreased to $21.3 million compared to $21.9 million in the third quarter
of 2005, due primarily to improved claims experience in the legacy worksite segment. The
total Company benefit ratio improved to 77.7% in the fourth quarter of 2005 compared to
82.8% in the third quarter of 2005. The benefit ratio in the legacy worksite segment was
67.3% in the fourth quarter of 2005, an improvement from a benefit ratio of 77.2% in the
third quarter of 2005, reflecting improved claims experience, particularly in the medicare
supplement and cancer product lines. The benefit ratio in the senior segment increased to
88.7% in the fourth quarter of 2005, compared to 85.2% in the third quarter of 2005
reflecting higher claims and lower premiums. The acquired business segment experienced a
fourth quarter 2005 benefit ratio of 115.8%, an improvement from 164.0% reported in the
third quarter of 2005, and a return to a more normal level, consistent with the first and
second quarters of 2005. The benefit ratio associated with the new KMG America worksite
activity increased to 62.3% in the fourth quarter of 2005 compared to 61.7% in the third
quarter of 2005 reflecting a higher proportion of stop loss insurance with higher reserve
requirements than those in voluntary product sales.

Expenses, taxes, licenses
and fees 
General insurance expenses, taxes,
licenses and fees (before deferrals of policy acquisition costs) for the fourth quarter of
2005 increased to $14.7 million compared to $14.4 million in the third quarter of 2005,
due primarily to higher salary expenses related to new hires.

Amortization of Deferred
Acquisition Costs (DAC)/Value of Business Acquired (VOBA)
Amortization of DAC/VOBA for the
fourth quarter of 2005 increased to $0.7 million compared to the $0.5 million in the third
quarter of 2005. Third quarter 2005 amortization reflected a $0.4 million benefit due to
favorable persistency in the long-term care block of business.

Non-recurring Items
When comparing fourth quarter 2005 to
third quarter 2005, bear in mind that the third quarter 2005 financial results contain two
non-recurring adjustments. First, there was a one-time pre-tax charge of $0.3 million in
the senior segment for severance and other termination costs relating to the sale of the
Fort Myers agency office, which closed October 5, 2005. Second, the corporate segment
included an offsetting a $0.3 million benefit in other income reflecting a favorable legal
settlement during the third quarter of 2005. The fourth quarter 2005 financial results
contained no such non-recurring adjustments.

*    *    *

2

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NOTES ON FINANCIAL
PRESENTATION
KMG America was formed on January 21,
2004 and commenced its insurance operations shortly before December 21, 2004, when it
completed its initial public offering of common stock and used a portion of the proceeds
to complete its acquisition of Kanawha Insurance Company. Results of operations, cash
flows and changes in shareholders equity for the quarter and twelve months ended
December 31, 2004 (the predecessor periods indicated on the attached financial tables),
reflect the historical operations of Kanawha only and do not include GAAP purchase
accounting (PGAAP) adjustments reflecting the acquisition. Results of
operations, cash flows and changes in shareholders equity for the quarter ended
December 31, 2005, and the quarter ended September 30, 2005 and KMG Americas
financial position as of December 31, 2004, and December 31, 2005, have been adjusted for
PGAAP adjustments reflecting the Kanawha acquisition.

Non-GAAP Financial
Measures

| |  | Operating Income  To supplement the financial statements presented on a GAAP basis,
the Company reported operating income, which is a non-GAAP measure. Operating income is
defined as net income excluding realized investment gains/losses (except for realized
investment gains/losses that are directly offset by executive deferred compensation
expense) and certain non-recurring items, net of income taxes. Management believes this
non-GAAP measure provides investors, potential investors, securities analysts and others
with useful additional information to evaluate the performance of the business, because it
excludes items that management believes are not indicative of the operating results of the
business. In addition, this non-GAAP measure is used by management to evaluate the
operating performance of the Company. The presentation of this additional information is
not meant to be considered in isolation or as a substitute for net income determined in
accordance with GAAP.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Pro Forma Financial Information  To supplement the financial statements presented on
a GAAP basis, the Company reported pro forma financial information that
adjusts the statements of income for the quarter and twelve months ended December 31, 2004
for the actual dollar value impact that the December 31, 2004 balance sheet PGAAP
adjustments had on the quarter and twelve months ended December 31, 2005 statements of
income, respectively. Such pro forma financial information is a non-GAAP measure.
Management believes this pro forma non-GAAP measure provides investors, potential
investors, securities analysts and others with useful additional information to evaluate
the performance of the business, because these purchase accounting adjustments relating to
the Kanawha acquisition have been incorporated in KMG Americas financial statements
for the quarter and twelve months ending December 31, 2005, and will be incorporated in
later reporting periods. The presentation of this additional information is not meant to
be considered in isolation or as a substitute for the results of operations or financial
position of the Company determined in accordance with GAAP.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A reconciliation of the non-GAAP
financial measures contained in this release to the most comparable GAAP measures appears
in the attached tables.

This press release contains
forward-looking statements that are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The accuracy of such statements is
subject to a number of risks, uncertainties and assumptions that may cause KMG America
Corporations actual results to differ materially from those expressed in the
forward-looking statements including, but not limited to: implementation of its business
strategy; hiring and retaining key employees; predicting and managing claims and other
costs; fluctuations in its investment portfolio; financial strength ratings of its
insurance subsidiary; government regulations, policies and investigations affecting the
insurance industry; competitive insurance products and pricing; reinsurance costs;
fluctuations in demand for insurance products; possible recessionary trends in the U.S.
economy; and other risks that are detailed from time to time in reports filed by the
Company with the Securities and Exchange Commission. KMG America Corporation assumes no
obligation to publicly update or revise any forward-looking statements.

KMG America Corporation is a holding
company that was formed to acquire the Southeastern regional insurance company, Kanawha
Insurance, and to operate and grow Kanawhas insurance and other related businesses
nationwide. KMG offers a broad mix of individual and group insurance products and
stop-loss coverage along with third-party administration services to employers and to
working Americans. For more information visit: www.kmgamerica.com.

|Contact: | Tim Daniels               
|-------- | --------------------------
|         | Ph: (952) 930-4807        
|         | tim.daniels@kmgamerica.com

3

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KMG America Corporation and Predecessor
Consolidated Statements of Income (GAAP basis, unaudited)
(in thousands, except percentages)

|                                           | KMG America |  | Predecessor |         | KMG America |   | Predecessor
|------------------------------------------ | ----------- |  | ----------- | ------- | ----------- | - | -----------
|                                           |             |  |             |         |             |   |            
|
|                                           |             |  |             |        
|
|                                           |             |  |             |         |             |   |            
|Insurance premiums, net of reinsurance     |             |  | $           | 27,450  |             | $ | 26,423     
|Net investment income                      |             |  |             | 7,203   |             |   | 7,089      
|Commission and fee income                  |             |  |             | 3,553   |             |   | 3,773      
|Realized investment gains                  |             |  |             | 34      |             |   | 278        
|Other income                               |             |  |             | 898     |             |   | 1,200      
|                                           |             |  |             |         |             |   |            
|Total revenues                             |             |  |             | 39,138  |             |   | 38,763     
|Policyholder benefits                      |             |  |             | 21,322  |             |   | 21,890     
|Insurance commissions, net of deferrals    |             |  |             | 2,353   |             |   | 2,239      
|Expenses, taxes, fees and depreciation     |             |  |             | 12,643  |             |   | 12,199     
|Amortization of DAC and VOBA (1)           |             |  |             | 706     |             |   | 463        
|                                           |             |  |             |         |             |   |            
|Total benefits and expenses                |             |  |             | 37,024  |             |   | 36,791     
|Income before income taxes                 |             |  |             | 2,114   |             |   | 1,972      
|(Provision) for income taxes               |             |  |             | (702    | )           |   | (634       
|                                           |             |  |             |         |             |   |            
|Net income before accounting changes       |             |  |             | 1,412   |             |   | 1,338      
|Cumulative accounting changes, net of tax  |             |  |             | 176     |             |   |           
|                                           |             |  |             |         |             |   |            
|Net income                                 |             |  | $           | 1,588   |             | $ | 1,338      
|                                           |             |  |             |         |             |   |            
|Operating income (2)                       |             |  | $           | 1,463   |             | $ | 1,249      
|Operating income excl. KMGA new activity   |             |  | $           | 3,685   |             | $ | 3,451      
|(see table below)                          |             | 
|Benefit ratio (3)                          |             |  |             | 77.7    | %           |   | 82.8       
|Average portfolio yield (4)                |             |  |             | 4.88    | %           |   | 4.81       
|Average invested assets                    |             |  | $           | 495,358 |             | $ | 482,435    
|Average cash/equivalents & short terms (4) |             |  |             | 95,232  |             |   | 107,271    
|                                           |             |  |             |         |             |   |            
|Total average cash and invested assets     |             |  | $           | 590,591 |             | $ | 589,707    
|                                           |             |  |             |         |             |   |            
|KMG America new activity:                  |             | 
|Insurance premiums, net of reinsurance     |             |  | $           | 1,824   |             | $ | 1,009      
|Net investment income                      |             |  |             |        |             |   |           
|                                           |             |  |             |         |             |   |            
|Total revenues                             |             |  |             | 1,824   |             |   | 1,009      
|Policyholder benefits                      |             |  |             | 1,137   |             |   | 623        
|Insurance commissions, net of deferrals    |             |  |             | 182     |             |   | 103        
|Expenses, taxes, fees and depreciation     |             |  |             | 3,858   |             |   | 3,549      
|Amortization of DAC and VOBA (1)           |             |  |             | 65      |             |   | 121        
|                                           |             |  |             |         |             |   |            
|Total benefits and expenses                |             |  |             | 5,242   |             |   | 4,396      
|Income before income taxes                 |             |  |             | (3,418  | )           |   | (3,387     
|(Provision) for income taxes               |             |  |             | 1,196   |             |   | 1,185      
|                                           |             |  |             |         |             |   |            
|Net income                                 |             |  | $           | (2,222  | )           | $ | (2,202     
|                                           |             |  |             |         |             |   |            

|(1) | DAC: Deferred Acquisition Costs; VOBA: Value of Business Acquired.
|--- | ------------------------------------------------------------------

|(2) | Operating income is defined as net income excluding realized investment
          gains/losses (except for realized investment gains/losses that are directly
          offset by executive deferred compensation expense), net of income taxes and
          certain non-recurring items, net of income taxes. Operating income for the
          twelve months ended December 31, 2004 included the one-time $1.0 million, net of
          tax, incentive payment identified in footnote (4) below.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Benefit ratio is defined as policyholder benefits (equal to incurred claims plus
          increases in policyholder active life reserves) divided by net premiums.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Average portfolio yield is defined as net investment income divided by average
          invested assets plus average cash and equivalents. Average cash/equivalents and
          short term assets include the portion of initial public offering proceeds that
          are invested short (less than 2 year maturities). Note that the twelve months
          ended December 31, 2004 average portfolio yield excludes the impact of the
          one-time pretax $1.6 million incentive payment to one of Kanawhas outside
          investment managers at the conclusion of the contract period.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4

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KMG America Corporation
Consolidated Statements of Income (GAAP basis, unaudited)
(in thousands, except percentages)

Period Covering January 21, 2004
through December 31, 2004

|                                        | QuarterEnded |  | Twelve Months Ended
|--------------------------------------- | ------------ |  | -------------------
|                                        |              |  |                    
|
|                                        |              |  |                    
|Insurance premiums, net of reinsurance  |              |  | $                  
|Net investment income                   |              |  |                    
|Commission and fee income               |              |  |                    
|Realized investment gains               |              |  |                    
|Other income                            |              |  |                    
|                                        |              |  |                    
|Total revenues                          |              |  |                    
|                                       
|Policyholder benefits                   |              |  |                    
|Insurance commissions, net of deferrals |              |  |                    
|Expenses, taxes, fees and depreciation  |              |  |                    
|Amortization of DAC and VOBA (1)        |              |  |                    
|                                        |              |  |                    
|Total benefits and expenses             |              |  |                    
|                                       
|Income before income taxes              |              |  |                    
|(Provision) for income taxes            |              |  |                    
|                                        |              |  |                    
|Net income                              |              |  | $                  
|                                        |              |  |                    

|(1) | DAC:
Deferred Acquisition Costs; VOBA: Value of Business Acquired.
|--- | ------------------------------------------------------------------

5

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KMG America Corporation and Subsidiary
Consolidated Balance Sheets
(in thousands, except share data)

|                                           | December 31, 2005 |  | December 31, 2004 (1)
|------------------------------------------ | ----------------- |  | ---------------------
|                                           |                   |  |                      
|
|Assets:                                    |                   |  |                      
|Cash and cash equivalents                  |                   |  | $                    
|Investments                                |                   |  |                      
|                                           |                   |  |                      
|Total cash and investments                 |                   |  |                      
|Accrued investment income                  |                   |  |                      
|DAC                                        |                   |  |                      
|VOBA                                       |                   |  |                      
|Other assets (2)                           |                   |  |                      
|Total assets                               |                   |  | $                    
|                                           |                   |  |                      
|                                          
|Liabilities and shareholders equity:      |                   | 
|Total policy and contract liabilities      |                   |  | $                    
|Deferred income taxes                      |                   |  |                      
|Other liabilities (3)                      |                   |  |                      
|                                           |                   |  |                      
|Total liabilities                          |                   |  |                      
|Total shareholders equity                 |                   |  |                      
|                                           |                   |  |                      
|Total liabilities and shareholders' equity |                   |  | $                    
|                                           |                   |  |                      
|                                          
|Book value per share: (4)                  |                   | 
|Basic                                      |                   |  | $                    
|Diluted                                    |                   |  | $                    
|                                          
|Book value per share: (excl FAS 115) (5)   |                   | 
|Basic                                      |                   |  | $                    
|Diluted                                    |                   |  | $                    
|                                          
|Ending shares outstanding:                 |                   | 
|Basic                                      |                   |  |                      
|Diluted (6)                                |                   |  |                      

|(1) | December 31, 2004 balance sheet is stated on PGAAP accounting basis and reflects
          the balance sheets of both the Predecessor and KMG America as of December 31,
          2004. Please refer to the supplemental schedule included here with the details
          of the PGAAP and KMG America adjustments.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Other assets include reinsurance balances recoverable, real estate and
          equipment, federal income tax recoverable and other assets.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Other liabilities include accounts payable and accrued expenses, $15.6 million
          of outstanding principal and accrued interest on a subordinated note as of
          December 31, 2005, and other miscellaneous liabilities.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Book values per share on December 31, 2004, are based on the number of shares
          issued in the IPO plus restricted shares issued subsequent to the IPO.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The book values are recalculated excluding $5.0 million of unrealized capital
          losses, net of taxes, on December 31, 2005. Unrealized capital gains were $0 on
          December 31, 2004.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Diluted shares were calculated using the treasury stock method.
|--- | ---------------------------------------------------------------

6

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KMG America Corporation and Predecessor
Consolidated Statements of Income - Unaudited, Predecessor 2004 Results
   Adjusted to PGAAP (Pro Forma)
(in thousands, except share data and percentages)

|                                          | KMG America |  | Predecessor |        | KMG America |   | Predecessor
|----------------------------------------- | ----------- |  | ----------- | ------ | ----------- | - | -----------
|                                          |             |  |             |        |             |   |            
|
|                                          |             |  |             |       
|
|                                          |             |  |             |        |             |   |            
|
|Insurance premiums, net of reinsurance    |             |  | $           | 27,450 |             | $ | 26,423     
|Net investment income                     |             |  |             | 7,203  |             |   | 7,089      
|Commissions and fee income                |             |  |             | 3,553  |             |   | 3,773      
|Realized investment gains                 |             |  |             | 34     |             |   | 278        
|Other income                              |             |  |             | 898    |             |   | 1,200      
|                                          |             |  |             |        |             |   |            
|Total revenues                            |             |  |             | 39,138 |             |   | 38,763     
|Policyholder benefits                     |             |  |             | 21,322 |             |   | 21,890     
|Insurance commissions, net of deferrals   |             |  |             | 2,353  |             |   | 2,239      
|Expenses, taxes, fees and depreciation    |             |  |             | 12,643 |             |   | 12,199     
|Amortization of DAC & VOBA                |             |  |             | 706    |             |   | 463        
|                                          |             |  |             |        |             |   |            
|Total benefits and expenses               |             |  |             | 37,024 |             |   | 36,791     
|Income before income taxes                |             |  |             | 2,114  |             |   | 1,972      
|(Provision) for income taxes              |             |  |             | (702   | )           |   | (634       
|                                          |             |  |             |        |             |   |            
|Net income before accounting changes      |             |  |             | 1,412  |             |   | 1,338      
|Cumulative accounting changes, net of tax |             |  |             | 176    |             |   |           
|                                          |             |  |             |        |             |   |            
|Net income                                |             |  | $           | 1,588  |             | $ | 1,338      
|                                          |             |  |             |        |             |   |            
|Net income per share:                     |             | 
|Basic                                     |             |  | $           | 0.07   |             | $ | 0.06       
|Diluted                                   |             |  | $           | 0.07   |             | $ | 0.06       
|Operating income (loss) : (1)             |             | 
|Worksite insurance business               |             |  | $           | 324    |             | $ | (535       
|Senior market insurance                   |             |  |             | 670    |             |   | 948        
|Third party administration business       |             |  |             | 172    |             |   | 367        
|Acquired business                         |             |  |             | 789    |             |   | 500        
|Corporate and other                       |             |  |             | (491   | )           |   | (31        
|                                          |             |  |             |        |             |   |            
|Total operating income                    |             |  | $           | 1,463  |             | $ | 1,249      
|Total excluding KMGA new activity         |             |  | $           | 3,738  |             | $ | 3,451      
|Operating income per share:               |             | 
|Basic                                     |             |  | $           | 0.07   |             | $ | 0.06       
|Diluted                                   |             |  | $           | 0.07   |             | $ | 0.06       
|Diluted - excl. KMGA new activity         |             |  | $           | 0.17   |             | $ | 0.16       
|Weighted-average shares outstanding:      |             | 
|Basic                                     |             |  |             | 22,108 |             |   | 22,090     
|Diluted                                   |             |  |             | 22,110 |             |   | 22,094     
|Benefit ratio                             |             |  |             | 77.7   | %           |   | 82.8       
|Average portfolio yield (3)               |             |  |             | 4.88   | %           |   | 4.81       

|(1) | Operating income is defined as net income excluding realized investment gains
          (losses), net of income taxes and certain non-recurring items, net of income
          taxes. Operating income for the twelve months ended December 31, 2004, included
          the one-time $1.0 million, net of tax, incentive payment to one of
          Kanawhas outside investment managers in March, 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Shares outstanding for the three months and twelve months ended December 31,
          2004 assume the same number of shares outstanding as the three months and twelve
          months ended December 31, 2005, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Average portfolio yield is defined as net investment income divided by average
          invested assets plus average cash and equivalents. Note that twelve months
          year-to-date 2004 average portfolio yield excludes the impact of the one-time
          pretax $1.6 million incentive payment identified in note 1.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

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PRO FORMA SEGMENT RESULTS (Unaudited)
(in thousands)

To supplement the financial
statements presented on a GAAP basis, the Company  reported pro forma financial
information that adjusts the income statements  for the quarter and twelve months ended
December 31, 2004 for the actual dollar  impact that the December 31, 2004, balance sheet
PGAAP adjustments had on the  income statements for the quarter and twelve months ended
December 31, 2005,  respectively. Pretax operating income excludes realized investment
gains/losses  (except for realized gains/losses that are directly offset by executive
 deferred compensation expenses) and other nonrecurring items.

|                                        | KMG America |  | Predecessor |         | KMG America |   | Predecessor
|--------------------------------------- | ----------- |  | ----------- | ------- | ----------- | - | -----------
|                                        |             |  |             |         |             |   |            
|
|                                        |             |  |             |        
|
|                                        |             |  |             |         |             |   |            
|
|Worksite insurance business - Legacy:   |             |  |             |         |             |   |            
|Insurance premiums, net of reinsurance  |             |  | $           | 13,912  |             | $ | 14,097     
|Net investment income                   |             |  |             | 1,602   |             |   | 1,537      
|Commissions and fee income              |             |  |             |        |             |   |           
|Realized investment gains               |             |  |             |        |             |   |           
|Other income                            |             |  |             | 42      |             |   | 40         
|                                        |             |  |             |         |             |   |            
|Total revenues                          |             |  |             | 15,556  |             |   | 15,674     
|Policyholder benefits                   |             |  |             | 9,367   |             |   | 10,878     
|Insurance commissions, net of deferrals |             |  |             | 833     |             |   | 745        
|Expenses, taxes, fees and depreciation  |             |  |             | 2,539   |             |   | 2,414      
|Amortization of DAC and VOBA            |             |  |             | 766     |             |   | 992        
|                                        |             |  |             |         |             |   |            
|Total benefits and expenses             |             |  |             | 13,505  |             |   | 15,029     
|                                        |             |  |             |         |             |   |            
|Income before income taxes              |             |  | $           | 2,051   |             | $ | 645        
|                                        |             |  |             |         |             |   |            
|Total assets                            |             |  | $           | 166,402 |             | $ | 167,107    
|                                        |             |  |             |         |             |   |            
|Worksite insurance business - KMGA:     |             | 
|Insurance premiums, net of reinsurance  |             |  | $           | 1,824   |             | $ | 1,009      
|Net investment income                   |             |  |             |        |             |   |           
|Commissions and fee income              |             |  |             |        |             |   |           
|Realized investment gains               |             |  |             |        |             |   |           
|Other income                            |             |  |             |        |             |   |           
|                                        |             |  |             |         |             |   |            
|Total revenues                          |             |  |             | 1,824   |             |   | 1,009      
|Policyholder benefits                   |             |  |             | 1,137   |             |   | 623        
|Insurance commissions, net of deferrals |             |  |             | 182     |             |   | 103        
|Expenses, taxes, fees and depreciation  |             |  |             | 1,992   |             |   | 1,630      
|Amortization of DAC and VOBA            |             |  |             | 65      |             |   | 121        
|                                        |             |  |             |         |             |   |            
|Total benefits and expenses             |             |  |             | 3,376   |             |   | 2,477      
|                                        |             |  |             |         |             |   |            
|Income before income taxes              |             |  | $           | (1,552  | )           | $ | (1,468     
|                                        |             |  |             |         |             |   |            
|Total assets                            |             |  | $           |        |             | $ |           
|                                        |             |  |             |         |             |   |            
|Senior market insurance business:       |             | 
|Insurance premiums, net of reinsurance  |             |  | $           | 10,135  |             | $ | 10,376     
|Net investment income                   |             |  |             | 1,297   |             |   | 1,195      
|Commissions and fee income              |             |  |             |        |             |   |           
|Realized investment gains               |             |  |             |        |             |   |           
|Other income                            |             |  |             | 747     |             |   | 732        
|                                        |             |  |             |         |             |   |            
|Total revenues                          |             |  |             | 12,179  |             |   | 12,303     
|Policyholder benefits                   |             |  |             | 8,989   |             |   | 8,845      
|Insurance commissions, net of deferrals |             |  |             | 1,240   |             |   | 1,294      
|Expenses, taxes, fees and depreciation  |             |  |             | 770     |             |   | 1,098      
|Amortization of DAC and VOBA            |             |  |             | 150     |             |   | (392       
|                                        |             |  |             |         |             |   |            
|Total benefits and expenses             |             |  |             | 11,149  |             |   | 10,845     
|                                        |             |  |             |         |             |   |            
|Income before income taxes              |             |  | $           | 1,030   |             | $ | 1,458      
|                                        |             |  |             |         |             |   |            
|Total assets                            |             |  | $           | 193,889 |             | $ | 185,675    
|                                        |             |  |             |         |             |   |            

8

---

PRO FORMA SEGMENT RESULTS (Unaudited) - Continued
(in thousands)

|                                        | KMG America |  | Predecessor |         | KMG America |   | Predecessor
|--------------------------------------- | ----------- |  | ----------- | ------- | ----------- | - | -----------
|                                        |             |  |             |         |             |   |            
|
|                                        |             |  |             |        
|
|                                        |             |  |             |         |             |   |            
|
|Third party administration business:    |             |  |             |         |             |   |            
|Insurance premiums, net of reinsurance  |             |  | $           |        |             | $ |           
|Net investment income                   |             |  |             |        |             |   |           
|Commissions and fee income              |             |  |             | 3,502   |             |   | 3,696      
|Realized investment gains               |             |  |             |        |             |   |           
|Other income                            |             |  |             | 2       |             |   |           
|                                        |             |  |             |         |             |   |            
|Total revenues                          |             |  |             | 3,504   |             |   | 3,696      
|Policyholder benefits                   |             |  |             |        |             |   |           
|Insurance commissions, net of deferrals |             |  |             |        |             |   |           
|Expenses, taxes, fees and depreciation  |             |  |             | 3,240   |             |   | 3,131      
|Amortization of DAC and VOBA            |             |  |             |        |             |   |           
|                                        |             |  |             |         |             |   |            
|Total benefits and expenses             |             |  |             | 3,240   |             |   | 3,131      
|                                        |             |  |             |         |             |   |            
|Income before income taxes              |             |  | $           | 264     |             | $ | 565        
|                                        |             |  |             |         |             |   |            
|Total assets                            |             |  | $           | 11,103  |             | $ | 10,327     
|                                        |             |  |             |         |             |   |            
|Acquired business:                      |             | 
|Insurance premiums, net of reinsurance  |             |  | $           | 1,579   |             | $ | 941        
|Net investment income                   |             |  |             | 1,964   |             |   | 1,866      
|Commissions and fee income              |             |  |             |        |             |   |           
|Realized investment gains               |             |  |             |        |             |   |           
|Other income                            |             |  |             | 18      |             |   | 20         
|                                        |             |  |             |         |             |   |            
|Total revenues                          |             |  |             | 3,561   |             |   | 2,827      
|Policyholder benefits                   |             |  |             | 1,829   |             |   | 1,543      
|Insurance commissions, net of deferrals |             |  |             | 99      |             |   | 98         
|Expenses, taxes, fees and depreciation  |             |  |             | 695     |             |   | 675        
|Amortization of DAC and VOBA            |             |  |             | (276    | )           |   | (258       
|                                        |             |  |             |         |             |   |            
|Total benefits and expenses             |             |  |             | 2,347   |             |   | 2,058      
|                                        |             |  |             |         |             |   |            
|Income before income taxes              |             |  | $           | 1,214   |             | $ | 769        
|                                        |             |  |             |         |             |   |            
|Total assets                            |             |  | $           | 204,288 |             | $ | 207,229    
|                                        |             |  |             |         |             |   |            
|Corporate & other:                      |             | 
|Insurance premiums, net of reinsurance  |             |  | $           |        |             | $ |           
|Net investment income                   |             |  |             | 2,340   |             |   | 2,490      
|Commissions and fee income              |             |  |             | 50      |             |   | 78         
|Realized investment gains               |             |  |             |        |             |   |           
|Other income                            |             |  |             | 89      |             |   | 407        
|                                        |             |  |             |         |             |   |            
|Total revenues                          |             |  |             | 2,479   |             |   | 2,975      
|Policyholder benefits                   |             |  |             |        |             |   |           
|Insurance commissions, net of deferrals |             |  |             |        |             |   |           
|Expenses, taxes, fees and depreciation  |             | 
|- Kanawha legacy                        |             |  |             | 1,427   |             |   | 1,191      
|- KMG America (KMGA) new activity       |             |  |             | 1,866   |             |   | 1,919      
|Amortization of DAC and VOBA            |             |  |             |        |             |   |           
|                                        |             |  |             |         |             |   |            
|Total benefits and expenses             |             |  |             | 3,293   |             |   | 3,110      
|                                        |             |  |             |         |             |   |            
|Income (loss) before income taxes       |             |  | $           | (814    | )           | $ | (135       
|                                        |             |  |             |         |             |   |            
|Income before income taxes              |             | 
|excluding KMGA new activity             |             |  | $           | 1,052   |             | $ | 1,784      
|                                        |             |  |             |         |             |   |            
|Total assets                            |             |  | $           | 221,683 |             | $ | 231,785    
|                                        |             |  |             |         |             |   |            

9

---

KMG America
CorporationReconciliation
of Operating Income and Pro Forma Consolidated Statements of Income (Unaudited)(in thousands)

|                                             |  | KMG America |   | Predecessor |   | KMG America |       | Predecessor
|-------------------------------------------- |  | ----------- | - | ----------- | - | ----------- | ----- | -----------
|
|
|                                             |  |             |   |             |   |             |       |            
|Net income as reported                       |  |             | $ | 1,588       |   | $           | 1,338 |            
|                                            
|Restatement to purchase accounting: (1)      |  |            
|Adjustment to investment income (2)          |  |             |   |            |   |             |      |            
|Adjustment to change in benefit reserves (3) |  |             |   |            |   |             |      |            
|Amortization of other intangible assets (4)  |  |             |   |            |   |             |      |            
|Amortization of DAC and VOBA (5)             |  |             |   |            |   |             |      |            
|Taxes on the above                           |  |             |   |            |   |             |      |            
|                                             |  |             |   |             |   |             |       |            
|                                            
|Net income - pro forma                       |  |             | $ | 1,588       |   | $           | 1,338 |            
|                                             |  |             |   |             |   |             |       |            
|                                            
|Reconciliation to operating income:          |  |            
|Exclude realized investment gains/losses,    |  |            
|net of offset for deferred compensation      |  |            
|expense (6)                                  |  |             |   | 79          |   |             | (137  | )          
|Exclude cumulative accounting changes        |  |             |   | (271        | ) |             |      |            
|Exclude one-time investment expense          |  |             |   |            |   |             |      |            
|Taxes on the above                           |  |             |   | 67          |   |             | 48    |            
|                                             |  |             |   |             |   |             |       |            
|                                            
|Operating income - pro forma                 |  |             | $ | 1,463       |   | $           | 1,249 |            
|                                             |  |             |   |             |   |             |       |            

|(1) | Adjustment of statements of income for the quarter and twelve month periods
          ended December 31, 2004, for the actual dollar value impact that the December
          31, 2004, balance sheet PGAAP adjustments had on the statements of income for
          the quarter and twelve month periods ended December 31, 2005, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Reflects
the  amortization of fair value  adjustment to the cost basis of  Kanawhas
fixed income and mortgage loan investments.
|--- | --------------------------------------------------------------------------------------------------------------------------------

|(3) | To
record the adjustment to historical  benefit  expense to reflect the new benefit
expense  relating to the future  policy and contract  reserves  restated to fair
value.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | To record amortization of the fair value of $7.7 million of certain intangible
          assets including product approvals in 45 states and future revenues associated
          with the customer relationships of Kanawha HealthCare Solutions, a wholly-owned
          direct subsidiary of Kanawha.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Reflects the adjustment to remove historical amortization of DAC and VOBA and to
          record amortization of the restated VOBA established on the balance sheet as of
          December 31, 2004.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Realized investment gains/losses include $254,000 and $113,000 of gains for both
          the quarter and twelve months ended December 31, 2005, respectively, related to
          executive deferred compensation trading activity that is fully offset in
          compensation expenses. Corresponding amounts for the quarter and twelve months
          ended December 31, 2004 are $323,000 and $407,000 of losses, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

---

Kanawha PredecessorReconciliation
of Pro Forma Reporting Segment Results (Unaudited)(in thousands)

|                                             |  | Worksite Insurance Segment
Kanawha Legacy |   | Senior Insurance Segment
|-------------------------------------------- |  | ----------------------------------------- | - | ------------------------
|
|
|                                             |  |                                           |   |                         
|Pretax income as reported                    |  |                                           | $ | (662                    
|                                            
|Restatement to Purchase Accounting: (1)      |  |                                          
|Adjustment to investment income (2)          |  |                                           |   | 307                     
|Adjustment to change in benefit reserves (3) |  |                                           |   | 1,073                   
|Amortization of DAC and VOBA (4)             |  |                                           |   | 514                     
|                                             |  |                                           |   |                         
|                                            
|Pretax operating income - pro forma          |  |                                           | $ | 1,232                   
|                                             |  |                                           |   |                         

|                                             |  | Acquired Insurance Segment |   | Corporate and Other Segment
|-------------------------------------------- |  | -------------------------- | - | ---------------------------
|
|
|                                             |  |                            |   |                            
|Pretax income as reported                    |  |                            | $ | (1,674                     
|                                            
|Adjust for realized investment gains         |  |                            |   |                            
|Adjust for one-time incentive payment        |  |                            |   |                            
|Adjustment to deferred comp expense (5)      |  |                            |   |                            
|                                            
|Restatement to Purchase Accounting: (1)      |  |                           
|Adjustment to investment income (2)          |  |                            |   | (10                        
|Adjustment to change in benefit reserves (3) |  |                            |   | 535                        
|Amortization of other intangible assets (6)  |  |                            |   |                            
|Amortization of DAC and VOBA (4)             |  |                            |   | 896                        
|                                             |  |                            |   |                            
|                                            
|Pretax operating income - pro forma          |  |                            | $ | (253                       
|                                             |  |                            |   |                            

|(1) | Adjustment of statements of income for the quarter and twelve month periods
          ended December 31, 2004, for the actual dollar value impact that the December
          31, 2004, balance sheet PGAAP adjustments had on the statements of income for
          the quarter and twelve month periods ended December 31, 2005, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Reflects the amortization of fair value adjustment to the cost basis of
          Kanawhas fixed income and mortgage loan investments.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

|(3) | To record the
          adjustment to historical benefit expense to reflect the new benefit expense
          relating to the future policy and contract reserves restated to fair value.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Reflects the adjustment to remove historical amortization of DAC and VOBA and to
          record amortization of the restated VOBA established on the balance sheet as of
          December 31, 2004.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | To offset the increase in executive deferred compensation expense with the
          portion of realized capital gains that gave rise to the deferred compensation
          expense increase.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | To record amortization of the fair value of $7.7 million of certain intangible
          assets including product approvals in 45 states and future revenues associated
          with the customer relationships of Kanawha Healthcare Solutions, a wholly-owned
          direct subsidiary of Kanawha.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11

---

Consolidated Balance
Sheet (Unaudited) - December 31, 2004(in thousands, except per share data)

|                                           |  | KanawhaHistorical |   | KMG
AmericaHistorical |  | Purchase GAAP
AdjustmentsIncr (Decr) |        |  | KMG
AmericaConsolidated
|------------------------------------------ |  | ----------------- | - | --------------------- |  | ------------------------------------ | ------ |  | -----------------------
|                                           |  |                   |   |                       |  |                                      |        |  |                        
|Assets:                                    |  |                   |   |                       |  |                                      |        |  |                        
|Cash and cash equivalents                  |  |                   | $ | 69,268                |  | $                                    | 48,132 |  | $                      
|Investments                                |  |                   |   | 459,844               |  |                                      |       |  |                        
|                                           |  |                   |   |                       |  |                                      |        |  |                        
|Total cash and investments                 |  |                   |   | 529,112               |  |                                      | 48,132 |  |                        
|Accrued investment income                  |  |                   |   | 4,909                 |  |                                      | 3      |  |                        
|Deferred acquisition costs (DAC)           |  |                   |   | 87,339                |  |                                      |       |  |                        
|Value of business acquired (VOBA)          |  |                   |   | 26,579                |  |                                      |       |  |                        
|Goodwill                                   |  |                   |   | 1,258                 |  |                                      |       |  |                        
|Other assets                               |  |                   |   | 90,971                |  |                                      | 117    |  |                        
|                                           |  |                   |   |                       |  |                                      |        |  |                        
|Total Assets                               |  |                   | $ | 740,168               |  | $                                    | 48,252 |  | $                      
|                                           |  |                   |   |                       |  |                                      |        |  |                        
|                                          
|Liabilities and shareholders equity:      |  |                  
|Total policy and contract liabilities      |  |                   | $ | 486,654               |  | $                                    |       |  | $                      
|Deferred income taxes                      |  |                   |   | 28,117                |  |                                      |       |  |                        
|Other liabilities                          |  |                   |   | 29,484                |  |                                      | 16,236 |  |                        
|                                           |  |                   |   |                       |  |                                      |        |  |                        
|Total Liabilities                          |  |                   |   | 544,255               |  |                                      | 16,236 |  |                        
|Total shareholders equity                 |  |                   |   | 195,913               |  |                                      | 32,016 |  |                        
|                                           |  |                   |   |                       |  |                                      |        |  |                        
|Total liabilities and shareholders equity |  |                   | $ | 740,168               |  | $                                    | 48,252 |  | $                      
|                                           |  |                   |   |                       |  |                                      |        |  |                        
|                                          
|Book value per share:                      |  |                  
|Basic                                      |  |                   |   |                       |  |                                      |        |  |                        
|Diluted                                    |  |                   |   |                       |  |                                      |        |  |                        
|                                          
|Ending shares outstanding:                 |  |                  
|Basic                                      |  |                   |   |                       |  |                                      |        |  |                        
|Diluted                                    |  |                   |   |                       |  |                                      |        |  |                        

|(1) | To
value Kanawhas  investment portfolio at its estimated fair value.
|--- | ---------------------------------------------------------------------

|(2) | To
eliminate Kanawhas deferred acquisition cost balance.
|--- | ---------------------------------------------------------

|(3) | To
eliminate  Kanawhas  value of  business  acquired  and replace it with the
present value of future profits of the business acquired.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(4) | To
eliminate Kanawhas goodwill balance.
|--- | ----------------------------------------

|(5) | To
record the fair value of certain  intangible  assets including trade names ($6.1
million);  licenses to conduct  insurance in 45 states ($3.7  million);  product
approvals in 45 states  ($2.8  million);  future  revenues  associated  with the
customer  relationships  of Kanawha  HealthCare  Solutions ($4.9  million);  and
change in fair value of reinsurance  receivable asset ($3. 5 million) related to
ceded  portion  of policy  and  contract  reserves  referenced  in  footnote  6.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | To
record the change in  Kanawhas  policy and contract reserves to fair value
(direct before reinsurance ceded).
|--- | -----------------------------------------------------------------------------------------------------------------

|(7) | To
adjust the  deferred  tax  liability  of Kanawha to account  for the  difference
between the estimated fair value of the net assets acquired and the tax basis of
the net assets acquired.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | To
adjust miscellaneous other liabilities to estimated fair value.
|--- | ------------------------------------------------------------------

12

---

KMG America
Corporation and PredecessorStatistical
and Operating Data at or for the Periods Indicated(in thousands, except percentages)

|OTHER FINANCIAL DATA                                        
|------------------------------------------------------------
|
|
|
|                                                            
|Sales - issued and paid for annualized premiums:            
|                                                            
|Worksite insurance segment - Kanawha Legacy                 
|Life                                                        
|Cancer                                                      
|Disability income                                           
|Other A&H                                                   
|                                                            
|Total worksite - Kanawha Legacy                             
|                                                            
|Worksite insurance segment - KMG America (KMGA) New Activity
|Core Group Products:                                        
|Life                                                        
|Stop loss                                                   
|Disability income                                           
|Other A&H                                                   
|Voluntary Benefit Products:                                 
|Life                                                        
|Cancer                                                      
|Disability income                                           
|Other A&H                                                   
|                                                            
|Total worksite - KMGA New Activity                          
|                                                            
|Senior market insurance segment                             
|Long term care                                              
|                                                            
|Total senior market insurance                               
|                                                            
|Total sales                                                 
|                                                            

|                                       |  | Quarter Ended |  | Twelve Months Ended
|-------------------------------------- |  | ------------- |  | -------------------
|
|Pro forma benefit ratios: (1)          | 
|Worksite insurance - Kanawha legacy    |  |               |  | 67.3%              
|Worksite insurance - KMGA new activity |  |               |  | 62.3%              
|Senior market insurance                |  |               |  | 88.7%              
|Acquired business                      |  |               |  | 115.8%             
|Total company                          |  |               |  | 77.7%              

|(1) | benefit ratio is defined as total policyholder benefits divided by total net
          premiums. Benefit ratios for the quarter and twelve months ended December 31,
          2004 have been adjusted to reflect the application of purchase accounting
          consistent with the earnings measurement basis in 2005.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

---