# Exhibit 99.1

Press Release:



For Immediate Release



KMG America Reports Third Quarter 2006 Operating Income of $0.10 Per Share, Net Income of $0.09 Per Share

KMG America Will Host an Investor Web Cast Today, Monday, November 6th at 10:00 A.M. EST



Minneapolis, MN, November 6, 2006  KMG America Corporation (the Company or KMG America) (NYSE: KMA) today reported net income of $2.0 million, or $0.09 per diluted share for the third quarter of 2006, compared to net income for the third quarter of 2005 of $1.3 million, or $0.06 per diluted share. The company reported operating income for the third quarter of $2.1 million, or $0.10 per diluted share, compared to operating income for the second quarter of 2006 of $1.1 million, or $0.05 per diluted share, and third quarter of 2005 operating income of $1.2 million, or $0.06 per diluted share.



KMG Americas Chief Executive Officer, Kenneth Kuk, commented, Our third quarter operating income results of $0.10 per share are consistent with our internal forecast and better than the analysts consensus estimate of $0.08 per share. This quarters results marks the seventh consecutive profitable quarter since the IPO with operating earnings up over 70% compared to the third quarter of 2005 and double the results reported in the second quarter 2006. Most key measurements continue a very positive trend including increasing sales and reduced operating losses on our new large case business.



THIRD QUARTER FINANCIAL RESULTS



Third quarter 2006 operating income (see discussion of non-GAAP financial measures below) improved to $2.1 million compared to second quarter 2006 operating income of $1.1 million, largely due to favorable claims experience in the Kanawha legacy business and revenue growth from the new large case sales activity.



Third quarter 2006 earnings results reflect several
unusual items that are largely offsetting. The favorable items include a pretax reimbursement of $0.3 million from our D&O
carriers for certain prior period litigation expenses related to the ReliaStar lawsuit. The current quarter also includes a
pretax offset of $0.2 million from reimbursement of current quarter litigation expenses related to the ReliaStar lawsuit, and we
would expect continuing legal expense reimbursements as the lawsuit progresses towards a conclusion. Also included in the current
quarter results is a one-time pretax financial benefit of $0.6 million resulting from an indemnification from the previous
shareholders of Kanawha. These favorable items were mostly offset by the recognition of $0.9 million of stop loss claims relating
to specific cases written in 2005 as we transition from formula reserving to actual claims experience as this block grows and
matures. Volatility, both favorable and unfavorable, is not uncommon in small, growing books of business. Cases giving rise to
these excess claims have since been re-priced or did not renew.



The discussion of operating earnings that follows has
been segregated into earnings attributed to the Kanawha legacy business and the earnings of the new large case activity. The
Company believes that segregating the earnings results of the new large case activity provides a more meaningful comparison of the
underlying strength in the earnings produced by Kanawhas legacy business. This earnings derivation is described later in Notes on Financial Presentation. The discussion below focuses on third quarter 2006
results compared to the second quarter 2006 results.



KANAWHA LEGACY ACTIVITY RESULTS



Operating income attributed to the Kanawha legacy business for the third quarter of 2006 was $4.3 million, or $0.19 per diluted share, up 21% compared to $3.6 million of operating income reported in the second quarter of 2006 due largely to favorable claims experience across all of its business segments and the $0.6 million pretax benefit related to the indemnification from the previous shareholders of Kanawha mentioned above. The benefit ratio reported for the Kanawha legacy business for the third quarter of 2006 improved to 75.3% compared to 82.2% reported in the second quarter of 2006.



Earned premiums reported in the Kanawha legacy
business for the third quarter of 2006 declined to $24.4 million, compared to $25.5 million reported in the second quarter of 2006
due to lapses of certain legacy worksite cases, the impact of an experience rating refund adjustment on one large treaty in the
Acquired Business segment, and to the seasonality effect of policy anniversaries of long term care policies reported in the Senior
segment. Amortization of DAC/VOBA (deferred acquisition costs/value of business acquired) increased to
$1.4 million in the third quarter of 2006 compared to $1.0 million reported in the second quarter of 2006 due largely to the
impact of increased lapses in the worksite segment and the delayed impact of both recently approved and pending rate increases in
the long term care block of business that tends to accelerate amortization. The amortization of VOBA on the long term care
business is expected to moderate as the pending rate increases are approved.



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NEW LARGE CASE ACTIVITY RESULTS



Operating losses attributed to the new large case activity improved to $2.2 million, or $0.09 per diluted share, compared to a loss of $2.5 million, or $0.11 per diluted share reported in the second quarter of 2006. Contributing factors to the improvement include positive growth in premium revenue driven by increased sales and the favorable impact of the reimbursement of ReliaStar litigation expenses from our D&O carrier. These favorable items were partially offset by increased claims on 2005 stop loss cases.



Premium revenue (net of reinsurance) increased to $9.8
million in the third quarter of 2006 compared to $5.2 million reported in the second quarter of 2006. Third quarter 2006 sales
results (as measured by new annualized issued premiums) attributed to the new large case activity improved to $12.8 million,
compared to $8.2 million for the second quarter of 2006. On a year-to-date basis, sales improved to $36.8 million compared to full
year 2005 sales of $12.2 million. The third quarter and year-to-date 2006 sales results include $5.3 million of annualized premium
related to the acquisition of a small block of life insurance policies that had a small but favorable effect on third quarter
earnings.



Excluding the small block acquisition, the benefit ratio reported for the new large case activity in the third quarter increased to 71.5% (79.4% as reported) compared to 66.1% reported in the second quarter of 2006, driven primarily by the $0.9 million of excess stop loss claims related to certain cases written in 2005 recognized in the current quarter.



*          *          *



NEW STATISTICAL SUPPLEMENT AVAILABLE ON WEBSITE



Substantial content changes have been made to the Company's earnings press release this quarter concurrent with the initial publication of a new statistical supplement on the kmgamerica.com
website. The statistical supplement can be accessed on the website via the Investor Relations tab, Financial
Reports tab, and found under the Quarterly & Other Reports section.



This change shortens and simplifies the press release
while focusing attention on the overall earnings strength of and trends in Kanawhas legacy business, while segregating the
revenue and earnings performance of the new large case activity. Much of the financial statement and explanatory detail previously
included in the press release will now be found in the new statistical supplement. A derivation of
normalized earnings is provided in the statistical supplement for the current and prior quarters to identify and remove unusual or temporary items and to help analysts and
investors focus on recurring earnings trends. While this reporting basis requires managements subjective judgment, the details are identified and
described so the investors and analysts can form their own opinions.



WEB CAST



The Company will host an investor and analyst web cast
today, Monday, November 6, 2006, at 10:00 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. The replay will be available starting approximately 2 hours
after the original web cast. The replay will be available through Monday, November 20, 2006.



ABOUT KMG AMERICA CORPORATION



KMG America is a holding company that was formed to
acquire the Southeastern regional insurance company, Kanawha Insurance Company, 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.

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NOTES ON FINANCIAL PRESENTATION



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), 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.




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



Presentation of Earnings Results:

During the first two years of operations, the
Company has separated the financial performance of KMG America into two primary components: Kanawha legacy activity and
new large case activity. This is done to highlight the strength of, and trends in, the Kanawha business activity
that existed prior to the acquisition (Kanawha legacy activity), and segregate these results from the financial performance related to transforming KMG America
into a new public company with a new national marketing focus (new large case activity). The financial results in the new
large case activity include all public company costs, the cost of the new management team, and all incremental sales and
underwriting costs and product revenues associated with sales generated by the new national sales organization.



FORWARD LOOKING INFORMATION



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 the Company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. The Company assumes no obligation to publicly update or revise any forward-looking statements.



Contact:
        Tim DanielsPh: (952) 930-4807tim.daniels@kmgamerica.com




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

|                                                         | Quarter Ended |  | Year-to-Date
|-------------------------------------------------------- | ------------- |  | ------------
|
|Operating income (1):                                    |               |  |             
|Insurance premiums, net of reinsurance                   |               |  | $           
|Net investment income                                    |               |  |             
|Commission and fee income                                |               |  |             
|Other income                                             |               |  |             
|                                                         |               |  |             
|Total revenues                                           |               |  |             
|                                                        
|Policyholder benefits                                    |               |  |             
|Insurance commissions, net of deferrals                  |               |  |             
|Expenses, taxes, fees and depreciation, net of deferrals |               |  |             
|Amortization of DAC and VOBA (2)                         |               |  |             
|                                                         |               |  |             
|Total benefits and expenses                              |               |  |             
|                                                        
|Operating income before income taxes                     |               |  |             
|(Provision) for income taxes                             |               |  |             
|                                                         |               |  |             
|Operating income                                         |               |  |             
|                                                         |               |  |             
|                                                        
|Operating income per share  diluted                     |               |  | $           
|                                                        
|Items excluded from operating income:                    |               | 
|Realized investment gains (losses)                       |               |  |             
|Deferred compensation expense adjustment (3)             |               |  |             
|                                                         |               |  |             
|Total items excluded from operating income, before tax   |               |  |             
|Income taxes, not applicable to operating income         |               |  |             
|                                                         |               |  |             
|Total items excluded from operating income, after tax    |               |  |             
|                                                         |               |  |             
|Net income                                               |               |  | $           
|                                                         |               |  |             
|                                                        
|Net income per share  diluted                           |               |  | $           
|                                                        
|Weighted-average shares outstanding  diluted:           |               |  |             
|                                                        
|Operating income split:                                 
|Kanawha legacy                                           |               |  | $           
|New large case activity                                  |               |  |             
|                                                         |               |  |             
|Total company                                            |               |  | $           
|                                                        
|Operating income per share  diluted                    
|Kanawha legacy                                           |               |  | $           
|New large case activity                                  |               |  | $           
|Total company                                            |               |  | $           
|                                                        
|Annualized operating return on average equity:          
|Kanawha legacy activity (4)                              |               |  |             
|Total company                                            |               |  |             

|(1) | Operating income is a non-GAAP measure, and is
defined as net income excluding realized gains (losses), except for realized gains (losses) that are directly offset by executive
deferred compensation expense, net of income taxes.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | DAC: deferred acquisition costs; VOBA: value of
business acquired.                                                                                                                                                                  
|(3) | Offsetting expense for realized gains (losses)
related to executive deferred compensation trading activity.                                                                                                                         
|(4) | Equity attributed to Kanawha legacy consists of the
initial allocation of IPO proceeds of $155 million increased by retained earnings from the Kanawha legacy business.                                                             

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

|                                           | September 30, 2006 |  | December 31, 2005
|------------------------------------------ | ------------------ |  | -----------------
|
|Assets:                                    |                    |  |                  
|Cash and cash equivalents                  |                    |  | $                
|Investments                                |                    |  |                  
|                                           |                    |  |                  
|Total cash and investments                 |                    |  |                  
|Accrued investment income                  |                    |  |                  
|DAC                                        |                    |  |                  
|VOBA                                       |                    |  |                  
|Other assets (1)                           |                    |  |                  
|                                           |                    |  |                  
|Total assets                               |                    |  | $                
|                                           |                    |  |                  
|                                          
|Liabilities and shareholders equity:      |                    | 
|Total policy and contract liabilities      |                    |  | $                
|Deferred income taxes                      |                    |  |                  
|Other liabilities (2)                      |                    |  |                  
|                                           |                    |  |                  
|Total liabilities                          |                    |  |                  
|Total shareholders equity                 |                    |  |                  
|                                           |                    |  |                  
|Total liabilities and shareholders equity |                    |  | $                
|                                           |                    |  |                  
|                                          
|Book value per share:                     
|Basic                                      |                    |  | $                
|Diluted                                    |                    |  | $                
|                                          
|Book value per share: (excl FAS 115) (3)   |                    | 
|Basic                                      |                    |  | $                
|Diluted                                    |                    |  | $                
|                                          
|Ending shares outstanding:                
|Basic                                      |                    |  |                  
|Diluted (4)                                |                    |  |                  

|(1) | Other assets include reinsurance balances
recoverable, real estate and equipment, federal income tax recoverable and other assets.                                                                                                                                                                                               
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Other liabilities include accounts payable and
accrued expenses, $14.9 million of outstanding principal and accrued interest on a subordinated note as of September 30, 2006, and
other miscellaneous liabilities. Outstanding principal and accrued interest on the subordinated note as of December 31, 2005 was
$15.8 million.
|(3) | The book values are recalculated excluding $7.8
million of unrealized capital losses, net of taxes, on September 30, 2006. Unrealized capital losses were $5.0 million, net of
taxes, on December 31, 2005.                                                                                                                      
|(4) | Diluted shares were calculated using the treasury
stock method.                                                                                                                                                                                                                                                                  

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# KMG America Corporation
Statistical and Operating Data at or for the Periods Indicated  Unaudited
(in thousands, except percentages)

|                                                         | Quarter Ended |  | Year-to-Date
|-------------------------------------------------------- | ------------- |  | ------------
|
|SALES RESULTS (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  New large case activity:    |               | 
|Core Group Products:                                    
|Life                                                     |               |  | $           
|Stop loss                                                |               |  |             
|Disability income                                        |               |  |             
|Other A&H                                                |               |  |             
|Voluntary Benefit Products:                              |               | 
|Life (1)                                                 |               |  |             
|Cancer                                                   |               |  |             
|Disability income                                        |               |  |             
|Other A&H                                                |               |  |             
|                                                         |               |  |             
|Total worksite  New large case activity                 |               |  |             
|                                                        
|Other Kanawha legacy sales:                              |               | 
|Long term care                                           |               |  |             
|                                                         |               |  |             
|                                                        
|Total sales                                              |               |  | $           
|                                                         |               |  |             
|                                                        
|OTHER KMG AMERICA KEY FINANCIAL INDICATORS:             
|                                                        
|Effective tax rate                                       |               |  |             
|                                                        
|Benefit ratio  total company (2):                       |               |  |             
|Kanawha legacy only                                      |               |  |             
|New large case activity only                             |               |  |             
|                                                        
|Expense ratio  total company (3):                       |               |  |             
|Kanawha legacy only                                      |               |  |             
|New large case activity only                             |               |  |             
|                                                        
|Average portfolio yield (4)                              |               |  |             
|                                                        
|Average invested assets                                  |               |  | $           
|Average cash/equivalents & short terms (4)               |               |  |             
|                                                         |               |  |             
|Total average cash and invested assets                   |               |  | $           
|                                                        
|Earned premiums and fees  total company:                |               |  | $           
|Kanawha legacy only                                      |               |  |             
|New large case activity only                             |               |  |             

|(1) | Life sales for the third quarter 2006 and nine
months year-to-date 2006 include $5.3 million of life sales related to a small block acquisition effective September 1, 2006
(primarily voluntary term life policies)                                                                                                                                     
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Benefit ratio is defined as total policyholder
benefits divided by total net premiums.                                                                                                                                                                                                                                                                   
|(3) | Expense ratio is defined as commissions, expenses
and amortization of DAC/VOBA (on operating income basis) divided by earned premiums plus commissions/fees.                                                                                                                                                                                             
|(4) | Average portfolio yield is defined as net investment
income divided by average invested assets, excluding the impact of FAS115 unrealized gains (losses) 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).

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