Exhibit 99.1

(KMG AMERICA LOGO)

KMG America Corporation (KMA)

Quarterly Financial Supplement

First Quarter 2007  Revised (see below)

This report is for
information purposes only. It should be read in conjunction with other
documents filed by KMG America with the Securities and Exchange Commission,
including the most recent Annual Report on Form 10-K, Quarterly Reports on Form
10-Q and earnings press releases furnished on Form 8-K. The interim financial
statements and related data included herein are unaudited. This report is dated
May 10, 2007. Information contained in this report may not be accurate after
such date. KMG America does not undertake a duty to update this information
after such date.
This statistical supplement was revised on May 10, 2007, to reflect the settlement of the ING/ReliaStar lawsuit on
May 4, 2007 that was incorporated into our first quarter earnings in the Form 10-Q filed on Thursday, May 10, but was not reflected
in the earnings release and original statistical supplement that were dated Monday, May 7, 2007.


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|                              
|------------------------------
|KMG
America Corporation       
|Quarterly
Financial Supplement
|First
Quarter 2007            

| |                                              |    |                                                                                                                    |       | 
| | -------------------------------------------- | -- | ------------------------------------------------------------------------------------------------------------------ | ----- | 
| | Table of
  Contents:                         |    | Page(s)                                                                                                           
| |                                              |    |                                                                                                                   
| |                                              |    |                                                                                                                   
| | KMG America background                       | 1 
| |                                              |   
| | KMG America analyst
  coverage               | 2 
| |                                              |   
| | Disclaimers                                  | 3 
| |                                              |   
| | Statements of operations:                    |   
| |                                              | n  | Total company results -
  quarterly                                                                                | 4    
| |                                              | n  | Total company results -
  year-to-date                                                                             | 5    
| |                                              | n  | Kanawha legacy results -
  quarterly                                                                               | 6    
| |                                              | n  | Kanawha legacy results -
  year-to-date                                                                            | 7    
| |                                              | n  | New large case activity
  results - quarterly                                                                      | 8    
| |                                              | n  | New large case activity
  results - year-to-date                                                                   | 9    
| |                                              |   
| | Calculations of diluted
  shares outstanding | 10
| |                                              |   
| | Share-based compensation
  detail            | 11
| |                                              |   
| | Normalization of
  statements of operations: |   
| |                                              | n  | Summary of earnings
  results - quarterly                                                                          | 12   
| |                                              | n  | Summary of earnings
  results - year-to-date                                                                       | 13   
| |                                              | n  | Details of normalizing
  adjustments                                                                               | 14-16
| |                                              | n  | Development of GAAP equity
  allocations for ROE calculations                                                      | 17   
| |                                              |   
| | Balance sheet                                | 18
| |                                              |   
| | Segment results:                             |   
| |                                              | n  | Segment results -
  quarterly                                                                                      | 19-21
| |                                              | n  | Segment results -
  year-to-date                                                                                   | 22-24
| |                                              |   
| | Sales Results:                               |   
| |                                              | n  | Sales results - quarterly                                                                                          | 25   
| |                                              | n  | Sales results -
  year-to-date                                                                                     | 26   
| |                                              |   
| | List of footnote
  references                | 27
| |                                              |   
| | APPENDIX - Segment Pro
  Forma Results:      |   
| |                                              | n  | Rationale for pro forma
  segment analysis                                                                         | 28   
| |                                              | n  | Pro forma segment
  quarterly operating results                                                                    | 29-31
| |                                              | n  | Reconciliation of pro
  forma operating income, consolidated statements of income and segment assets
  (unaudited) | 32-33

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|                              
|------------------------------
|KMG America Corporation       
|Quarterly Financial Supplement
|First Quarter 2007            

KMG America Background

KMG America is a holding
company incorporated under the laws of Commonwealth of Virginia on January 21,
2004. KMG America commenced operations shortly before it completed its initial
public offering of common stock on December 21, 2004, and its shares trade on
the New York Stock Exchange under the symbol KMA. Concurrently with the
completion of its initial public offering, KMG America completed its
acquisition of Kanawha and its subsidiaries, which are KMG Americas primary
operating subsidiaries and which underwrite and sell life and health insurance
products. Kanawha, the primary operating subsidiary of KMG America, is licensed
to issue life and accident and health insurance. Kanawha is domiciled in South
Carolina. Kanawha has one wholly owned subsidiary, Kanawha HealthCare
Solutions, Inc., a third-party administrator with operations in Lancaster and
Greenville, South Carolina. The primary insurance products that we underwrite
include: life insurance; disability insurance; dental insurance; indemnity
health insurance; critical illness insurance and employer excess risk
insurance. We ceased actively underwriting new long-term care insurance
policies after December 31, 2005. We intend to retain and actively manage our
existing block of in force long-term care policies. Our third-party
administration and medical management businesses include a wide array of
services with the primary emphasis on the offering of administrative
service-only products. Historically, our sales have been primarily in the
southeastern United States, predominantly in Florida, South Carolina and North
Carolina, but are now expanding nationwide. Sales are made through an internal
sales force, full-time agents, general agents and brokers. Under our current
business strategy, we expect group lines of business to account for an
increasing percentage of the Companys premium revenues.

The operations of KMG America
commenced shortly before the acquisition of Kanawha, which was funded by an
initial public offering of KMG America common stock completed in December,
2004, in which 21.7 million shares were sold at $9.50 per share. The offering
raised approximately $190 million after offering expenses were deducted. The
$145 million purchase of Kanawha was financed with $130 million of cash and a
$15 million subordinated 5 year note accruing interest at 5% per annum. Excess
capital from the IPO has funded certain start-up costs, and will support future
growth.

We have separated the financial performance of KMG America into two
primary components: Kanawha legacy activity and new large case activity.
This has been done to highlight the results of operations of, and trends in,
the Kanawha business activity that existed prior to the acquisition (Kanawha
legacy activity) from the financial performance related to transforming KMG
America into a new public company with a new marketing focus (the financial
results included in the new large case activity includes 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).

For SEC reporting purposes
KMG America is composed of five reporting segments:

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Worksite Insurance Business(includes both the new large case activity and the Kanawha legacy worksite
business that prior to the acquisition by KMG America sold voluntary
payroll-deduct products to smaller employers through specialized independent
and career agents in the Southeast, primarily the Carolinas);                                                                                          
|
| | 2. | Senior Market Insurance
Business(includes long term care product sales sold primarily through a
specialized independent sales force managed by a company-owned agency based
in Fort Myers, Florida. The agency was sold in 2005, new sales of long term
care policies were effectively discontinued, and the profitable book of long
term care policies in-force is now effectively managed as a closed block);
|
| | 3. | Acquired Business(includes
various closed blocks of group and individual life and health policies
Kanawha acquired from other insurance companies from the late 1980s through
the late 1990s);                                                                                                                                                                                                               
|
| | 4. | Third Party Administration
Business(includes revenues and costs associated with the unaffiliated
clients of Kanawha Healthcare Solutions, an affiliated third party
administrator focused primarily on employer self-funded medical plans); and                                                                                                                                                                
|
| | 5. | Corporate and Other(includes unallocated expenses and investment income relating to both the new
large case activity and the Kanawha legacy activity).                                                                                                                                                                                                                                                         

The executive office of KMG
America is located in Minnetonka, Minnesota at 12600 Whitewater Drive, Suite
150, 55343. Kanawha Insurance Company is located in Lancaster, South Carolina
at 210 South White Street, 29720. KMG America is a Virginia corporation, and
Kanawha Insurance Company is domiciled in South Carolina. The stock of KMG
America is publicly traded on the New York Stock Exchange under the symbol
KMA.

1

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|                              
|------------------------------
|KMG America Corporation       
|Quarterly Financial Supplement
|First Quarter 2007            

KMG America (KMA) Analyst Coverage Information

|                             |  |                      |         |              |  |              | 
|---------------------------- |  | -------------------- | ------- | ------------ |  | ------------ | 
|FIRM                         |  |                      | ANALYST |              |  | PHONE NUMBER | 
|                             |  |                      |         |              |  |              | 
|                             |  |                      |         |             
|Credit
  Suisse              |  | Thomas
  Gallagher   |         | 212-538-2010
|                             |  | Craig
  Siegenthaler |         | 212-325-3104
|                             |  |                      |         |             
|Friedman
  Billings Ramsey   |  | Randy Binner         |         | 703-312-1890
|                             |  |                      |         |             
|Piper
  Jaffray              |  | Michael
  Grasher    |         | 312-920-2142
|                             |  |                      |         |             
|SunTrust
  Robinson Humphrey |  | David Lewis          |         | 404-926-5097
|                             |  |                      |         |             

|                                           |  |                                                  
|------------------------------------------ |  | -------------------------------------------------
|Investor inquiries may be directed to:     |  |                                                  
|                                           |  |                                                  
|Scott H.
  DeLong, Chief Financial Officer |  | Tim Daniels,
  Vice President, Corporate Planning
|Email:
  scott.delong@kmgamerica.com       |  | Email:
  tim.daniels@kmgamerica.com              
|Voice:
  952-930-4804                      |  | Voice:
  952-930-4807                            
|Fax:
  952-930-4802                        |  | Fax:
  952-930-4802                              

Note: This list is provided
for informational purposes only. KMA does not endorse the analyses, conclusions,
or recommendations contained in any report issued by these or any other
analysts.

Statistical data will be
available immediately after the release of earnings for each quarter through
KMAs company website http://www.kmgamerica.com. The statistical supplement can
be accessed through the Investor Relations tab, Financial Reports
tab, and can be located under the Quarterly & Other Reports section.

2

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|                              
|------------------------------
|KMG America Corporation       
|Quarterly Financial Supplement
|First Quarter 2007            

DISCLAIMERS

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.

Normalized
Earnings To supplement the financial statements presented on a GAAP basis,
the Company reported normalized earnings, which is a non-GAAP measure.
Normalized earnings are defined as operating income adjusted for timing
differences and unusual and nonrecurring 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. We have placed this derivation for the
current and most recent seven quarters on pages 12-16 in this statistical supplement.
While this exercise requires managements subjective judgment, the details are
identified and described so the investors and analysts can form their own
opinions.

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

FORWARD LOOKING INFORMATION:

This
statistical supplement contains certain 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.

3

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KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

Consolidated Statements of Income (unaudited)
(in thousands, except share data and percentages)

|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|---------------------------------------------------------- |  | ------------- | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|                                                           |  | TOTAL COMPANY |        
|                                                           |  |               |        
|                                                           |  | Quarter Ended |        
|                                                           |  |              
|Operating income (1):                                      |  | 3/31/2007     |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|Insurance premiums, net of reinsurance                     |  | $             | 39,916  |            | $ | 33,261    |   | $         | 34,235  |           | $ | 30,662     |   | $         | 29,811  |           | $ | 27,450  |   | $ | 26,423  |   | $ | 26,817  |  
|Net investment income                                      |  |               | 7,876   |            |   | 7,668     |   |           | 7,453   |           |   | 7,619      |   |           | 7,206   |           |   | 7,203   |   |   | 7,089   |   |   | 6,800   |  
|Commission and fee income                                  |  |               | 4,168   |            |   | 4,151     |   |           | 4,018   |           |   | 4,117      |   |           | 4,219   |           |   | 3,553   |   |   | 3,773   |   |   | 3,671   |  
|Gain on extinguishment of debt                             |  |               |        |            |   | 1,021     |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Other income                                               |  |               | 1,059   |            |   | 1,267     |   |           | 1,275   |           |   | 923        |   |           | 986     |           |   | 898     |   |   | 1,200   |   |   | 978     |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total revenues                                             |  |               | 53,019  |            |   | 47,368    |   |           | 46,981  |           |   | 43,321     |   |           | 42,222  |           |   | 39,104  |   |   | 38,485  |   |   | 38,266  |  
|                                                          
|Policyholder benefits                                      |  |               | 37,543  |            |   | 25,929    |   |           | 26,186  |           |   | 24,373     |   |           | 23,354  |           |   | 21,322  |   |   | 21,890  |   |   | 20,646  |  
|Insurance commissions, net of deferrals                    |  |               | 4,152   |            |   | 3,574     |   |           | 3,246   |           |   | 2,924      |   |           | 2,981   |           |   | 2,353   |   |   | 2,239   |   |   | 2,377   |  
|Expenses, taxes, fees and depreciation, net of deferrals   |  |               | 14,432  |            |   | 14,085    |   |           | 12,578  |           |   | 13,274     |   |           | 12,852  |           |   | 12,530  |   |   | 12,058  |   |   | 13,103  |  
|Amortization of DAC and VOBA (2)                           |  |               | 2,081   |            |   | 91        |   |           | 1,682   |           |   | 1,155      |   |           | 1,178   |           |   | 706     |   |   | 463     |   |   | 1,214   |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total benefits and expenses                                |  |               | 58,208  |            |   | 43,679    |   |           | 43,692  |           |   | 41,726     |   |           | 40,365  |           |   | 36,911  |   |   | 36,650  |   |   | 37,340  |  
|                                                          
|Operating income (loss) before income taxes                |  |               | (5,189  | )          |   | 3,689     |   |           | 3,289   |           |   | 1,595      |   |           | 1,857   |           |   | 2,193   |   |   | 1,835   |   |   | 926     |  
|(Provision) for income taxes                               |  |               | (5,002  | )          |   | (1,303    | ) |           | (1,150  | )         |   | (543       | ) |           | (630    | )         |   | (730    | ) |   | (586    | ) |   | (224    | )
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Operating income (loss)                                    |  |               | (10,191 | )          |   | 2,386     |   |           | 2,139   |           |   | 1,052      |   |           | 1,227   |           |   | 1,463   |   |   | 1,249   |   |   | 702     |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Items excluded from operating income:                      |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Realized investment gains (losses)                         |  |               | (53     | )          |   | 1,115     |   |           | 7       |           |   | (115       | ) |           | 211     |           |   | 34      |   |   | 278     |   |   | 19      |  
|Deferred compensation expense adjustment                   |  |               | (58     | )          |   | (264      | ) |           | (181    | )         |   | 61         |   |           | (197    | )         |   | (113    | ) |   | (141    | ) |   |        |  
|Cumulative effect of accounting change                     |  |               |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   | 271     |   |   |        |   |   |        |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total items excluded from operating income, before
tax     |  |               | (111    | )          |   | 851       |   |           | (174    | )         |   | (54        | ) |           | 14      |           |   | 192     |   |   | 137     |   |   | 19      |  
|Income taxes, not applicable to operating
income           |  |               | 39      |            |   | (298      | ) |           | 61      |           |   | 19         |   |           | (5      | )         |   | (67     | ) |   | (48     | ) |   | (7      | )
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total items excluded from operating income, after
tax      |  |               | (72     | )          |   | 553       |   |           | (113    | )         |   | (35        | ) |           | 9       |           |   | 125     |   |   | 89      |   |   | 12      |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Net income (loss)                                          |  | $             | (10,263 | )          | $ | 2,939     |   | $         | 2,026   |           | $ | 1,017      |   | $         | 1,236   |           | $ | 1,588   |   | $ | 1,338   |   | $ | 714     |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Earnings per share - fully diluted:                        |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|- Net income                                               |  | $             | (0.46   | )          | $ | 0.13      |   | $         | 0.09    |           | $ | 0.05       |   | $         | 0.06    |           | $ | 0.07    |   | $ | 0.06    |   | $ | 0.03    |  
|- Operating income                                         |  | $             | (0.46   | )          | $ | 0.11      |   | $         | 0.10    |           | $ | 0.05       |   | $         | 0.06    |           | $ | 0.07    |   | $ | 0.06    |   | $ | 0.03    |  
|                                                          
|Annual return on average equity (operating income
  basis) |  |               | -21.0   | %          |   | 4.8       | % |           | 4.4     | %         |   | 2.2        | % |           | 2.5     | %         |   | 3.1     | % |   | 2.6     | % |   | 1.5     | %
|                                                          
|Weighted-average shares outstanding - diluted:             |  |               | 22,258  |            |   | 22,213    |   |           | 22,208  |           |   | 22,218     |   |           | 22,138  |           |   | 22,110  |   |   | 22,094  |   |   | 22,072  |  
|Effective tax rate                                         |  |               | -93.6   | %          |   | 35.3      | % |           | 34.9    | %         |   | 34.0       | % |           | 33.9    | %         |   | 33.4    | % |   | 32.2    | % |   | 24.4    | %
|Benefit ratio (3)                                          |  |               | 94.1    | %          |   | 78.0      | % |           | 76.5    | %         |   | 79.5       | % |           | 78.3    | %         |   | 77.7    | % |   | 82.8    | % |   | 77.0    | %
|Expense ratio (4)                                          |  |               | 46.9    | %          |   | 47.4      | % |           | 45.8    | %         |   | 49.9       | % |           | 50.0    | %         |   | 50.3    | % |   | 48.9    | % |   | 54.8    | %
|Average portfolio yield (5)                                |  |               | 5.16    | %          |   | 5.20      | % |           | 5.11    | %         |   | 5.25       | % |           | 4.95    | %         |   | 4.88    | % |   | 4.81    | % |   | 4.69    | %
|Average invested assets                                    |  | $             | 560,301 |            | $ | 551,464   |   | $         | 544,679 |           | $ | 532,746    |   | $         | 519,669 |           | $ | 495,358 |   | $ | 482,435 |   | $ | 485,978 |  
|Average cash/equivalents & short term assets (6)           |  |               | 50,356  |            |   | 37,946    |   |           | 38,813  |           |   | 47,363     |   |           | 62,679  |           |   | 95,232  |   |   | 107,271 |   |   | 94,583  |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total average cash and invested assets                     |  | $             | 610,657 |            | $ | 589,409   |   | $         | 583,492 |           | $ | 580,109    |   | $         | 582,348 |           | $ | 590,591 |   | $ | 589,707 |   | $ | 580,562 |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

Refer to page 27 for footnote
descriptions

4

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KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

Consolidated Statements of Income (unaudited)
(in thousands, except share data and percentages)

|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|---------------------------------------------------------- |  | ------------- | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|                                                           |  | TOTAL COMPANY |        
|                                                           |  |               |        
|                                                           |  | Year-to-Date  |        
|                                                           |  |              
|Operating
  income (1):                                    |  | 3/31/2007     |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|Insurance premiums, net of reinsurance                     |  | $             | 39,916  |            | $ | 127,969   |   | $         | 94,708  |           | $ | 60,473     |   | $         | 29,811  |           | $ | 106,888 |   | $ | 79,438  |   | $ | 53,015  |  
|Net investment income                                      |  |               | 7,876   |            |   | 29,946    |   |           | 22,278  |           |   | 14,825     |   |           | 7,206   |           |   | 27,745  |   |   | 20,542  |   |   | 13,453  |  
|Commission and fee income                                  |  |               | 4,168   |            |   | 16,505    |   |           | 12,354  |           |   | 8,336      |   |           | 4,219   |           |   | 14,565  |   |   | 11,012  |   |   | 7,239   |  
|Gain on extinguishment of debt                             |  |               |        |            |   | 1,021     |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Other income                                               |  |               | 1,059   |            |   | 4,451     |   |           | 3,184   |           |   | 1,909      |   |           | 986     |           |   | 3,868   |   |   | 2,970   |   |   | 1,770   |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total revenues                                             |  |               | 53,019  |            |   | 179,892   |   |           | 132,524 |           |   | 85,543     |   |           | 42,222  |           |   | 153,066 |   |   | 113,962 |   |   | 75,477  |  
|                                                          
|Policyholder benefits                                      |  |               | 37,543  |            |   | 99,842    |   |           | 73,913  |           |   | 47,727     |   |           | 23,354  |           |   | 84,288  |   |   | 62,966  |   |   | 41,076  |  
|Insurance commissions, net of deferrals                    |  |               | 4,152   |            |   | 12,725    |   |           | 9,151   |           |   | 5,905      |   |           | 2,981   |           |   | 9,635   |   |   | 7,282   |   |   | 5,043   |  
|Expenses, taxes, fees and depreciation, net of deferrals   |  |               | 14,432  |            |   | 52,789    |   |           | 38,704  |           |   | 26,126     |   |           | 12,852  |           |   | 49,167  |   |   | 36,637  |   |   | 24,579  |  
|Amortization of DAC and VOBA (2)                           |  |               | 2,081   |            |   | 4,106     |   |           | 4,015   |           |   | 2,333      |   |           | 1,178   |           |   | 3,468   |   |   | 2,762   |   |   | 2,299   |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total benefits and expenses                                |  |               | 58,208  |            |   | 169,462   |   |           | 125,783 |           |   | 82,091     |   |           | 40,365  |           |   | 146,558 |   |   | 109,647 |   |   | 72,997  |  
|                                                          
|Operating income (loss) before income taxes                |  |               | (5,189  | )          |   | 10,430    |   |           | 6,741   |           |   | 3,452      |   |           | 1,857   |           |   | 6,508   |   |   | 4,315   |   |   | 2,480   |  
|(Provision) for income taxes                               |  |               | (5,002  | )          |   | (3,625    | ) |           | (2,323  | )         |   | (1,173     | ) |           | (630    | )         |   | (2,092  | ) |   | (1,362  | ) |   | (776    | )
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Operating income (loss)                                    |  |               | (10,191 | )          |   | 6,805     |   |           | 4,418   |           |   | 2,279      |   |           | 1,227   |           |   | 4,416   |   |   | 2,953   |   |   | 1,704   |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Items excluded from operating income:                      |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Realized investment gains (losses)                         |  |               | (53     | )          |   | 1,218     |   |           | 103     |           |   | 96         |   |           | 211     |           |   | 358     |   |   | 324     |   |   | 46      |  
|Deferred compensation expense adjustment                   |  |               | (58     | )          |   | (581      | ) |           | (317    | )         |   | (136       | ) |           | (197    | )         |   | (254    | ) |   | (141    | ) |   |        |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total items excluded from operating income, before
tax     |  |               | (111    | )          |   | 637       |   |           | (214    | )         |   | (40        | ) |           | 14      |           |   | 104     |   |   | 183     |   |   | 46      |  
|Income taxes, not applicable to operating
income           |  |               | 39      |            |   | (223      | ) |           | 75      |           |   | 14         |   |           | (5      | )         |   | (36     | ) |   | (64     | ) |   | (16     | )
|Cumulative effect of accounting change, net of tax         |  |               |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   | 176     |   |   |        |   |   |        |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total items excluded from operating income, after tax      |  |               | (72     | )          |   | 414       |   |           | (139    | )         |   | (26        | ) |           | 9       |           |   | 244     |   |   | 119     |   |   | 30      |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Net income (loss)                                          |  | $             | (10,263 | )          | $ | 7,219     |   | $         | 4,279   |           | $ | 2,253      |   | $         | 1,236   |           | $ | 4,660   |   | $ | 3,072   |   | $ | 1,734   |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Earnings per share - fully diluted:                        |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|- Net income                                               |  | $             | (0.46   | )          | $ | 0.33      |   | $         | 0.19    |           | $ | 0.10       |   | $         | 0.06    |           | $ | 0.21    |   | $ | 0.14    |   | $ | 0.08    |  
|- Operating income                                         |  | $             | (0.46   | )          | $ | 0.31      |   | $         | 0.20    |           | $ | 0.10       |   | $         | 0.06    |           | $ | 0.20    |   | $ | 0.13    |   | $ | 0.08    |  
|                                                          
|Annual return on average equity (operating income
  basis) |  |               | -21.0   | %          |   | 3.5       | % |           | 3.0     | %         |   | 2.4        | % |           | 2.5     | %         |   | 2.3     | % |   | 2.1     | % |   | 1.8     | %
|                                                          
|Weighted-average shares outstanding - diluted:             |  |               | 22,258  |            |   | 22,202    |   |           | 22,199  |           |   | 22,197     |   |           | 22,138  |           |   | 22,091  |   |   | 22,084  |   |   | 22,106  |  
|                                                          
|Effective tax rate                                         |  |               | -93.6   | %          |   | 34.8      | % |           | 34.4    | %         |   | 34.0       | % |           | 33.9    | %         |   | 32.2    | % |   | 31.7    | % |   | 31.4    | %
|                                                          
|Benefit ratio (3)                                          |  |               | 94.1    | %          |   | 78.0      | % |           | 78.0    | %         |   | 78.9       | % |           | 78.3    | %         |   | 78.9    | % |   | 79.3    | % |   | 77.5    | %
|                                                          
|Expense ratio (4)                                          |  |               | 46.9    | %          |   | 48.2      | % |           | 48.4    | %         |   | 49.9       | % |           | 50.0    | %         |   | 51.3    | % |   | 51.6    | % |   | 53.0    | %
|                                                          
|Average portfolio yield (5)                                |  |               | 5.16    | %          |   | 5.12      | % |           | 5.10    | %         |   | 5.10       | % |           | 4.95    | %         |   | 4.75    | % |   | 4.69    | % |   | 4.64    | %
|                                                          
|Average invested assets                                    |  | $             | 560,301 |            | $ | 536,132   |   | $         | 532,174 |           | $ | 525,911    |   | $         | 519,669 |           | $ | 484,763 |   | $ | 477,893 |   | $ | 477,699 |  
|Average cash/equivalents & short term assets (6)           |  |               | 50,356  |            |   | 48,390    |   |           | 50,746  |           |   | 55,353     |   |           | 62,679  |           |   | 99,406  |   |   | 106,424 |   |   | 102,189 |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total average cash and invested assets                     |  | $             | 610,657 |            | $ | 584,522   |   | $         | 582,920 |           | $ | 581,264    |   | $         | 582,348 |           | $ | 584,169 |   | $ | 584,318 |   | $ | 579,888 |  
|                                                           |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

Refer to page 27 for footnote
descriptions

5

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

Consolidated Statements of Income (unaudited)
(in thousands, except share data and percentages)

|                                                           |  |                         |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|---------------------------------------------------------- |  | ----------------------- | ------ | ---------- | - | --------- | - | --------- | ------ | --------- | - | ---------- | - | --------- | ------ | --------- | - | ------ | - | - | ------ | - | - | ------ | -
|                                                           |  | KANAWHA LEGACY ACTIVITY |       
|                                                           |  |                         |       
|                                                           |  | Quarter Ended           |       
|                                                           |  |                        
|Operating income (1):                                      |  | 3/31/2007               |        | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |        | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |        | 6/30/2005 |  
|                                                           |  |                         |        |            |   |           |   |           |        |           |   |            |   |           |        |           |  
|Insurance premiums, net of reinsurance                     |  | $                       | 24,067 |            | $ | 24,448    |   | $         | 24,401 |           | $ | 25,495     |   | $         | 25,276 |           | $ | 25,626 |   | $ | 25,414 |   | $ | 26,721 |  
|Net investment income                                      |  |                         | 7,876  |            |   | 7,668     |   |           | 7,453  |           |   | 7,619      |   |           | 7,206  |           |   | 7,203  |   |   | 7,089  |   |   | 6,800  |  
|Commission and fee income                                  |  |                         | 4,168  |            |   | 4,151     |   |           | 4,018  |           |   | 4,117      |   |           | 4,219  |           |   | 3,553  |   |   | 3,773  |   |   | 3,671  |  
|Gain on extinguishment of debt                             |  |                         |       |            |   |          |   |           |       |           |   |           |   |           |       |           |   |       |   |   |       |   |   |       |  
|Other income                                               |  |                         | 951    |            |   | 1,058     |   |           | 1,275  |           |   | 923        |   |           | 986    |           |   | 898    |   |   | 1,200  |   |   | 978    |  
|                                                           |  |                         |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Total revenues                                             |  |                         | 37,062 |            |   | 37,325    |   |           | 37,147 |           |   | 38,154     |   |           | 37,687 |           |   | 37,280 |   |   | 37,476 |   |   | 38,170 |  
|                                                          
|Policyholder benefits                                      |  |                         | 20,170 |            |   | 17,592    |   |           | 18,382 |           |   | 20,960     |   |           | 20,282 |           |   | 20,185 |   |   | 21,267 |   |   | 20,576 |  
|Insurance commissions, net of deferrals                    |  |                         | 2,512  |            |   | 2,311     |   |           | 2,293  |           |   | 2,215      |   |           | 2,342  |           |   | 2,171  |   |   | 2,136  |   |   | 2,363  |  
|Expenses, taxes, fees and depreciation, net of deferrals   |  |                         | 8,747  |            |   | 8,763     |   |           | 8,518  |           |   | 8,570      |   |           | 8,598  |           |   | 8,672  |   |   | 8,509  |   |   | 9,076  |  
|Amortization of DAC and VOBA (2)                           |  |                         | 1,480  |            |   | (200      | ) |           | 1,352  |           |   | 961        |   |           | 984    |           |   | 641    |   |   | 342    |   |   | 1,214  |  
|                                                           |  |                         |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Total benefits and expenses                                |  |                         | 32,909 |            |   | 28,466    |   |           | 30,545 |           |   | 32,706     |   |           | 32,206 |           |   | 31,669 |   |   | 32,254 |   |   | 33,229 |  
|                                                          
|Operating income before income taxes                       |  |                         | 4,153  |            |   | 8,859     |   |           | 6,602  |           |   | 5,448      |   |           | 5,481  |           |   | 5,611  |   |   | 5,222  |   |   | 4,941  |  
|(Provision) for income taxes                               |  |                         | (1,439 | )          |   | (3,112    | ) |           | (2,309 | )         |   | (1,891     | ) |           | (1,899 | )         |   | (1,926 | ) |   | (1,772 | ) |   | (1,630 | )
|                                                           |  |                         |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Operating income                                           |  | $                       | 2,714  |            | $ | 5,747     |   | $         | 4,293  |           | $ | 3,557      |   | $         | 3,583  |           | $ | 3,685  |   | $ | 3,451  |   | $ | 3,311  |  
|                                                           |  |                         |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|                                                           |  |                         |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Operating earnings per share - fully diluted:              |  | $                       | 0.12   |            | $ | 0.26      |   | $         | 0.19   |           | $ | 0.16       |   | $         | 0.16   |           | $ | 0.17   |   | $ | 0.16   |   | $ | 0.15   |  
|                                                           |  |                         |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Annual return on average equity (operating income
  basis) |  |                         | 5.8    | %          |   | 12.6      | % |           | 9.7    | %         |   | 8.2        | % |           | 8.4    | %         |   | 8.9    | % |   | 8.5    | % |   | 8.3    | %
|                                                           |  |                         |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Weighted-average shares outstanding - diluted:             |  |                         | 22,258 |            |   | 22,213    |   |           | 22,208 |           |   | 22,218     |   |           | 22,138 |           |   | 22,110 |   |   | 22,094 |   |   | 22,072 |  
|                                                           |  |                         |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Effective tax rate                                         |  |                         | 34.6   | %          |   | 35.1      | % |           | 35.0   | %         |   | 34.7       | % |           | 34.6   | %         |   | 34.3   | % |   | 33.9   | % |   | 33.0   | %
|                                                           |  |                         |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Benefit ratio (3)                                          |  |                         | 83.8   | %          |   | 72.0      | % |           | 75.3   | %         |   | 82.2       | % |           | 80.2   | %         |   | 78.8   | % |   | 83.7   | % |   | 77.0   | %
|                                                           |  |                         |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Expense ratio (4)                                          |  |                         | 45.0   | %          |   | 38.0      | % |           | 42.8   | %         |   | 39.7       | % |           | 40.4   | %         |   | 39.4   | % |   | 37.6   | % |   | 41.6   | %

Refer to page 27 for footnote descriptions

6

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

Consolidated Statements of Income (unaudited)
(in thousands, except share data and percentages)

|                                                           |  |                           |        |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |         |   |   |        |  
|---------------------------------------------------------- |  | ------------------------- | ------ | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------ | --------- | - | ------- | - | - | ------- | - | - | ------ | -
|                                                           |  | KANAWHA
  LEGACY ACTIVITY |       
|                                                           |  |                           |       
|                                                           |  | Year-to-Date              |       
|                                                           |  |                          
|Operating income (1):                                      |  | 3/31/2007                 |        | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |        | 6/30/2005 |  
|                                                           |  |                           |        |            |   |           |   |           |         |           |   |            |   |           |        |           |  
|Insurance premiums, net of reinsurance                     |  | $                         | 24,067 |            | $ | 99,620    |   | $         | 75,172  |           | $ | 50,771     |   | $         | 25,276 |           | $ | 103,959 |   | $ | 78,333  |   | $ | 52,919 |  
|Net investment income                                      |  |                           | 7,876  |            |   | 29,946    |   |           | 22,278  |           |   | 14,825     |   |           | 7,206  |           |   | 27,745  |   |   | 20,542  |   |   | 13,453 |  
|Commission and fee income                                  |  |                           | 4,168  |            |   | 16,505    |   |           | 12,354  |           |   | 8,336      |   |           | 4,219  |           |   | 14,565  |   |   | 11,012  |   |   | 7,239  |  
|Gain on extinguishment of debt                             |  |                           |       |            |   |          |   |           |        |           |   |           |   |           |       |           |   |        |   |   |        |   |   |       |  
|Other income                                               |  |                           | 951    |            |   | 4,242     |   |           | 3,184   |           |   | 1,909      |   |           | 986    |           |   | 3,868   |   |   | 2,970   |   |   | 1,770  |  
|                                                           |  |                           |        |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |         |   |   |        |  
|Total revenues                                             |  |                           | 37,062 |            |   | 150,313   |   |           | 112,988 |           |   | 75,841     |   |           | 37,687 |           |   | 150,137 |   |   | 112,857 |   |   | 75,381 |  
|                                                          
|Policyholder benefits                                      |  |                           | 20,170 |            |   | 77,216    |   |           | 59,624  |           |   | 41,242     |   |           | 20,282 |           |   | 82,458  |   |   | 62,273  |   |   | 41,006 |  
|Insurance commissions, net of deferrals                    |  |                           | 2,512  |            |   | 9,161     |   |           | 6,850   |           |   | 4,557      |   |           | 2,342  |           |   | 9,336   |   |   | 7,165   |   |   | 5,029  |  
|Expenses, taxes, fees and depreciation, net of deferrals   |  |                           | 8,747  |            |   | 34,449    |   |           | 25,686  |           |   | 17,168     |   |           | 8,598  |           |   | 35,287  |   |   | 26,615  |   |   | 18,106 |  
|Amortization of DAC and VOBA (2)                           |  |                           | 1,480  |            |   | 3,097     |   |           | 3,297   |           |   | 1,945      |   |           | 984    |           |   | 3,282   |   |   | 2,641   |   |   | 2,299  |  
|                                                           |  |                           |        |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |         |   |   |        |  
|Total benefits and expenses                                |  |                           | 32,909 |            |   | 123,923   |   |           | 95,457  |           |   | 64,912     |   |           | 32,206 |           |   | 130,363 |   |   | 98,694  |   |   | 66,440 |  
|                                                          
|Operating income before income taxes                       |  |                           | 4,153  |            |   | 26,390    |   |           | 17,531  |           |   | 10,929     |   |           | 5,481  |           |   | 19,774  |   |   | 14,163  |   |   | 8,941  |  
|(Provision) for income taxes                               |  |                           | (1,439 | )          |   | (9,211    | ) |           | (6,099  | )         |   | (3,790     | ) |           | (1,899 | )         |   | (6,735  | ) |   | (4,809  | ) |   | (3,037 | )
|                                                           |  |                           |        |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |         |   |   |        |  
|Operating income                                           |  | $                         | 2,714  |            | $ | 17,179    |   | $         | 11,432  |           | $ | 7,139      |   | $         | 3,583  |           | $ | 13,039  |   | $ | 9,354   |   | $ | 5,904  |  
|                                                           |  |                           |        |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |         |   |   |        |  
|                                                           |  |                           |        |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |         |   |   |        |  
|Operating earnings per share - fully diluted:              |  | $                         | 0.12   |            | $ | 0.77      |   | $         | 0.51    |           | $ | 0.32       |   | $         | 0.16   |           | $ | 0.59    |   | $ | 0.42    |   | $ | 0.27   |  
|                                                           |  |                           |        |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |         |   |   |        |  
|Annual return on average equity (operating income
  basis) |  |                           | 5.8    | %          |   | 9.7       | % |           | 8.8     | %         |   | 8.3        | % |           | 8.4    | %         |   | 8.1     | % |   | 7.8     | % |   | 7.5    | %
|                                                           |  |                           |        |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |         |   |   |        |  
|Weighted-average shares outstanding - diluted:             |  |                           | 22,258 |            |   | 22,202    |   |           | 22,199  |           |   | 22,197     |   |           | 22,138 |           |   | 22,091  |   |   | 22,084  |   |   | 22,106 |  
|                                                           |  |                           |        |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |         |   |   |        |  
|Effective tax rate                                         |  |                           | 34.6   | %          |   | 34.9      | % |           | 34.8    | %         |   | 34.7       | % |           | 34.6   | %         |   | 34.1    | % |   | 34.0    | % |   | 34.0   | %
|                                                           |  |                           |        |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |         |   |   |        |  
|Benefit ratio (3)                                          |  |                           | 83.8   | %          |   | 77.5      | % |           | 79.3    | %         |   | 81.2       | % |           | 80.2   | %         |   | 79.3    | % |   | 79.5    | % |   | 77.5   | %
|                                                           |  |                           |        |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |         |   |   |        |  
|Expense ratio (4)                                          |  |                           | 45.0   | %          |   | 40.2      | % |           | 40.9    | %         |   | 40.0       | % |           | 40.4   | %         |   | 40.4    | % |   | 40.8    | % |   | 42.3   | %

Refer to page 27 for footnote descriptions

7

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

Consolidated Statements of Income - unaudited
(in thousands, except share data and percentages)

|                                            |  |                         |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|------------------------------------------- |  | ----------------------- | ------- | ---------- | - | --------- | - | --------- | ------ | --------- | - | ---------- | - | --------- | ------ | --------- | - | ------ | - | - | ------ | - | - | ------ | -
|                                            |  | NEW LARGE CASE ACTIVITY |        
|                                            |  |                         |        
|                                            |  | Quarter Ended           |        
|                                            |  |                        
|Operating income (1):                       |  | 3/31/2007               |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |        | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |        | 6/30/2005 |  
|                                            |  |                         |         |            |   |           |   |           |        |           |   |            |   |           |        |           |  
|Insurance premiums, net of reinsurance      |  | $                       | 15,849  |            | $ | 8,813     |   | $         | 9,834  |           | $ | 5,167      |   | $         | 4,535  |           | $ | 1,824  |   | $ | 1,009  |   | $ | 96     |  
|Net investment income                       |  |                         |        |            |   |          |   |           |       |           |   |           |   |           |       |           |   |       |   |   |       |   |   |       |  
|Commission and fee income                   |  |                         |        |            |   |          |   |           |       |           |   |           |   |           |       |           |   |       |   |   |       |   |   |       |  
|Gain on extinguishment of debt              |  |                         |        |            |   | 1,021     |   |           |       |           |   |           |   |           |       |           |   |       |   |   |       |   |   |       |  
|Other income                                |  |                         | 108     |            |   | 209       |   |           |       |           |   |           |   |           |       |           |   |       |   |   |       |   |   |       |  
|                                            |  |                         |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Total revenues                              |  |                         | 15,957  |            |   | 10,043    |   |           | 9,834  |           |   | 5,167      |   |           | 4,535  |           |   | 1,824  |   |   | 1,009  |   |   | 96     |  
|                                           
|Policyholder benefits                       |  |                         | 17,373  |            |   | 8,337     |   |           | 7,804  |           |   | 3,413      |   |           | 3,072  |           |   | 1,137  |   |   | 623    |   |   | 70     |  
|Insurance commissions, net of deferrals     |  |                         | 1,640   |            |   | 1,263     |   |           | 953    |           |   | 709        |   |           | 639    |           |   | 182    |   |   | 103    |   |   | 14     |  
|Expenses, taxes, fees and depreciation      |  |                         | 5,685   |            |   | 5,322     |   |           | 4,060  |           |   | 4,704      |   |           | 4,254  |           |   | 3,858  |   |   | 3,549  |   |   | 4,027  |  
|Amortization of DAC and VOBA (2)            |  |                         | 601     |            |   | 291       |   |           | 330    |           |   | 194        |   |           | 194    |           |   | 65     |   |   | 121    |   |   |       |  
|                                            |  |                         |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Total benefits and expenses                 |  |                         | 25,299  |            |   | 15,213    |   |           | 13,147 |           |   | 9,020      |   |           | 8,159  |           |   | 5,242  |   |   | 4,396  |   |   | 4,111  |  
|                                           
|Income (loss) before income taxes           |  |                         | (9,342  | )          |   | (5,170    | ) |           | (3,313 | )         |   | (3,853     | ) |           | (3,624 | )         |   | (3,418 | ) |   | (3,387 | ) |   | (4,015 | )
|(Provision) for income taxes                |  |                         | (3,563  | )          |   | 1,810     |   |           | 1,160  |           |   | 1,349      |   |           | 1,268  |           |   | 1,196  |   |   | 1,185  |   |   | 1,405  |  
|                                            |  |                         |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Operating income (loss)                     |  | $                       | (12,905 | )          | $ | (3,361    | ) | $         | (2,153 | )         | $ | (2,504     | ) | $         | (2,356 | )         | $ | (2,222 | ) | $ | (2,202 | ) | $ | (2,610 | )
|                                            |  |                         |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|                                            |  |                         |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Operating income (loss) per share - diluted |  | $                       | (0.58   | )          | $ | (0.15     | ) | $         | (0.09  | )         | $ | (0.11      | ) | $         | (0.10  | )         | $ | (0.10  | ) | $ | (0.10  | ) | $ | (0.12  | )
|                                            |  |                         |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Weighted-average shares outstanding:        |  |                         | 22,258  |            |   | 22,213    |   |           | 22,208 |           |   | 22,218     |   |           | 22,138 |           |   | 22,110 |   |   | 22,094 |   |   | 22,072 |  
|                                            |  |                         |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Effective tax rate                          |  |                         | -38.1   | %          |   | 35.0      | % |           | 35.0   | %         |   | 35.0       | % |           | 35.0   | %         |   | 35.0   | % |   | 35.0   | % |   | 35.0   | %
|                                            |  |                         |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Benefit ratio (3)                           |  |                         | 109.6   | %          |   | 94.6      | % |           | 79.4   | %         |   | 66.1       | % |           | 67.7   | %         |   | 62.3   | % |   | 61.7   | % |   | 72.9   | %
|                                            |  |                         |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Expense ratio (4)                           |  |                         | 50.0    | %          |   | 78.0      | % |           | 54.3   | %         |   | 108.5      | % |           | 112.2  | %         |   | 225.1  | % |   | 373.9  | % |   | NA     |  

Refer to page 27 for footnote descriptions

8

---



KMG
America Corporation 
Quarterly Financial Supplement 
First Quarter 2007

Consolidated Statements of Income - unaudited
(in thousands, except share data and percentages)

|                                              |  |                           |         |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |        |   |   |        |  
|--------------------------------------------- |  | ------------------------- | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------ | --------- | - | ------- | - | - | ------ | - | - | ------ | -
|                                              |  | NEW LARGE
  CASE ACTIVITY |        
|                                              |  |                           |         |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |        |   |   |        |  
|                                              |  | Year-to-Date              |        
|                                              |  |                          
|Operating income (1):                         |  | 3/31/2007                 |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |        | 6/30/2005 |  
|                                              |  |                           |         |            |   |           |   |           |         |           |   |            |   |           |        |           |  
|Insurance
  premiums, net of reinsurance      |  | $                         | 15,849  |            | $ | 28,349    |   | $         | 19,536  |           | $ | 9,702      |   | $         | 4,535  |           | $ | 2,929   |   | $ | 1,105  |   | $ | 96     |  
|Net investment
  income                       |  |                           |        |            |   |          |   |           |        |           |   |           |   |           |       |           |   |        |   |   |       |   |   |       |  
|Commission and
  fee income                   |  |                           |        |            |   |          |   |           |        |           |   |           |   |           |       |           |   |        |   |   |       |   |   |       |  
|Gain on
  extinguishment of debt              |  |                           |        |            |   | 1,021     |   |           |        |           |   |           |   |           |       |           |   |        |   |   |       |   |   |       |  
|Other income                                  |  |                           | 108     |            |   | 209       |   |           |        |           |   |           |   |           |       |           |   |        |   |   |       |   |   |       |  
|                                              |  |                           |         |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |        |   |   |        |  
|Total revenues                                |  |                           | 15,957  |            |   | 29,579    |   |           | 19,536  |           |   | 9,702      |   |           | 4,535  |           |   | 2,929   |   |   | 1,105  |   |   | 96     |  
|                                             
|Policyholder
  benefits                       |  |                           | 17,373  |            |   | 22,626    |   |           | 14,289  |           |   | 6,485      |   |           | 3,072  |           |   | 1,830   |   |   | 693    |   |   | 70     |  
|Insurance
  commissions, net of deferrals     |  |                           | 1,640   |            |   | 3,564     |   |           | 2,301   |           |   | 1,348      |   |           | 639    |           |   | 299     |   |   | 117    |   |   | 14     |  
|Expenses, taxes,
  fees and depreciation      |  |                           | 5,685   |            |   | 18,340    |   |           | 13,018  |           |   | 8,958      |   |           | 4,254  |           |   | 13,880  |   |   | 10,022 |   |   | 6,473  |  
|Amortization of
  DAC and VOBA (2)            |  |                           | 601     |            |   | 1,009     |   |           | 718     |           |   | 388        |   |           | 194    |           |   | 186     |   |   | 121    |   |   |       |  
|                                              |  |                           |         |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |        |   |   |        |  
|Total benefits
  and expenses                 |  |                           | 25,299  |            |   | 45,539    |   |           | 30,326  |           |   | 17,179     |   |           | 8,159  |           |   | 16,195  |   |   | 10,953 |   |   | 6,557  |  
|                                             
|Income (loss)
  before income taxes           |  |                           | (9,342  | )          |   | (15,960   | ) |           | (10,790 | )         |   | (7,477     | ) |           | (3,624 | )         |   | (13,266 | ) |   | (9,848 | ) |   | (6,461 | )
|(Provision) for
  income taxes                |  |                           | (3,563  | )          |   | 5,586     |   |           | 3,777   |           |   | 2,617      |   |           | 1,268  |           |   | 4,643   |   |   | 3,447  |   |   | 2,261  |  
|                                              |  |                           |         |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |        |   |   |        |  
|Operating
  income (loss)                     |  | $                         | (12,905 | )          | $ | (10,374   | ) | $         | (7,014  | )         | $ | (4,860     | ) | $         | (2,356 | )         | $ | (8,623  | ) | $ | (6,401 | ) | $ | (4,200 | )
|                                              |  |                           |         |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |        |   |   |        |  
|                                              |  |                           |         |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |        |   |   |        |  
|Operating
  income (loss) per share - diluted |  | $                         | (0.58   | )          | $ | (0.47     | ) | $         | (0.31   | )         | $ | (0.22      | ) | $         | (0.10  | )         | $ | (0.39   | ) | $ | (0.29  | ) | $ | (0.19  | )
|                                              |  |                           |         |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |        |   |   |        |  
|Weighted-average
  shares outstanding:        |  |                           | 22,258  |            |   | 22,202    |   |           | 22,199  |           |   | 22,197     |   |           | 22,138 |           |   | 22,091  |   |   | 22,084 |   |   | 22,106 |  
|                                              |  |                           |         |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |        |   |   |        |  
|Effective tax
  rate                          |  |                           | -38.1   | %          |   | 35.0      | % |           | 35.0    | %         |   | 35.0       | % |           | 35.0   | %         |   | 35.0    | % |   | 35.0   | % |   | 35.0   | %
|                                              |  |                           |         |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |        |   |   |        |  
|Benefit ratio (3)                             |  |                           | 109.6   | %          |   | 79.8      | % |           | 73.1    | %         |   | 66.8       | % |           | 67.7   | %         |   | 62.5    | % |   | 62.7   | % |   | 72.9   | %
|                                              |  |                           |         |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |        |   |   |        |  
|Expense ratio (4)                             |  |                           | 50.0    | %          |   | 80.8      | % |           | 82.1    | %         |   | 110.2      | % |           | 112.2  | %         |   | 490.4   | % |   | 928.5  | % |   | NA     |  
|                                              |  |                           |         |            |   |           |   |           |         |           |   |            |   |           |        |           |   |         |   |   |        |   |   |        |  
|Refer to page 27 for footnote descriptions   

9

---



KMG America Corporation 
Quarterly Financial Supplement 
First Quarter 2007

CALCULATIONS OF DILUTED SHARES OUTSTANDING
(shares in actual amounts)

|                                        |  |                |            |            |  |            |  |           |            |           |  |            |  |           |            |           |  |            |  |  |            |  |  |            | 
|--------------------------------------- |  | -------------- | ---------- | ---------- |  | ---------- |  | --------- | ---------- | --------- |  | ---------- |  | --------- | ---------- | --------- |  | ---------- |  |  | ---------- |  |  | ---------- | 
|                                        |  | Period
  Ended |           
|                                        |  |               
|                                        |  | 3/31/2007      |            | 12/31/2006 |  | 9/30/2006  |  | 6/30/2006 |            | 3/31/2006 |  | 12/31/2005 |  | 9/30/2005 |            | 6/30/2005 | 
|                                        |  |                |            |            |  |            |  |           |            |           |  |            |  |           |            |          
|Ending shares:                          |  |                |            |            |  |            |  |           |            |           |  |            |  |           |            |           |  |            |  |  |            |  |  |            | 
|Common shares outstanding - basic       |  |                | 22,213,685 |            |  | 22,211,589 |  |           | 22,209,093 |           |  | 22,206,703 |  |           | 22,200,828 |           |  | 22,125,998 |  |  | 22,105,775 |  |  | 22,071,641 | 
|Incremental shares to compute diluted   |  |                |           |            |  | 87,520     |  |           |           |           |  | 33,818     |  |           | 2,073      |           |  | 4,628      |  |  |           |  |  | 33,026     | 
|                                        |  |                |            |            |  |            |  |           |            |           |  |            |  |           |            |           |  |            |  |  |            |  |  |            | 
|Common shares outstanding - diluted     |  |                | 22,213,685 |            |  | 22,299,109 |  |           | 22,209,093 |           |  | 22,240,521 |  |           | 22,202,901 |           |  | 22,130,626 |  |  | 22,105,775 |  |  | 22,104,667 | 
|                                        |  |                |            |            |  |            |  |           |            |           |  |            |  |           |            |           |  |            |  |  |            |  |  |            | 
|Weighted average shares -
year-to-date: |  |                |            |            |  |            |  |           |            |           |  |            |  |           |            |           |  |            |  |  |            |  |  |            | 
|Common shares outstanding - basic       |  |                | 22,211,761 |            |  | 22,187,830 |  |           | 22,180,730 |           |  | 22,167,545 |  |           | 22,133,240 |           |  | 22,085,585 |  |  | 22,077,950 |  |  | 22,071,641 | 
|Incremental shares to compute diluted   |  |                | 46,338     |            |  | 13,901     |  |           | 17,978     |           |  | 29,704     |  |           | 4,838      |           |  | 5,359      |  |  | 5,724      |  |  | 34,778     | 
|                                        |  |                |            |            |  |            |  |           |            |           |  |            |  |           |            |           |  |            |  |  |            |  |  |            | 
|Common shares outstanding - diluted     |  |                | 22,258,099 |            |  | 22,201,731 |  |           | 22,198,708 |           |  | 22,197,249 |  |           | 22,138,078 |           |  | 22,090,944 |  |  | 22,083,674 |  |  | 22,106,419 | 
|                                        |  |                |            |            |  |            |  |           |            |           |  |            |  |           |            |           |  |            |  |  |            |  |  |            | 
|Weighted average shares - quarter
only: |  |                |            |            |  |            |  |           |            |           |  |            |  |           |            |           |  |            |  |  |            |  |  |            | 
|Common shares outstanding - basic       |  |                | 22,211,761 |            |  | 22,209,016 |  |           | 22,206,893 |           |  | 22,201,305 |  |           | 22,133,240 |           |  | 22,108,489 |  |  | 22,090,273 |  |  | 22,071,641 | 
|Incremental shares to compute diluted   |  |                | 46,338     |            |  | 4,241      |  |           | 1,088      |           |  | 16,330     |  |           | 4,838      |           |  | 1,819      |  |  | 3,581      |  |  |           | 
|                                        |  |                |            |            |  |            |  |           |            |           |  |            |  |           |            |           |  |            |  |  |            |  |  |            | 
|Common shares outstanding - diluted     |  |                | 22,258,099 |            |  | 22,213,257 |  |           | 22,207,981 |           |  | 22,217,635 |  |           | 22,138,078 |           |  | 22,110,308 |  |  | 22,093,854 |  |  | 22,071,641 | 

10

---



KMG
America Corporation 
Quarterly Financial Supplement 
First Quarter 2007

SHARE BASED COMPENSATION DETAIL
(all amounts in actual dollars)

|                                                |  |                |           |            |   |           |  |           |           |           |   |            |  |           |           |           |   |           |  |   |           |  |   |           |  |   |           | 
|----------------------------------------------- |  | -------------- | --------- | ---------- | - | --------- |  | --------- | --------- | --------- | - | ---------- |  | --------- | --------- | --------- | - | --------- |  | - | --------- |  | - | --------- |  | - | --------- | 
|                                                |  | Period
  Ended |          
|                                                |  |               
|                                                |  | 3/31/2007      |           | 12/31/2006 |   | 9/30/2006 |  | 6/30/2006 |           | 3/31/2006 |   | 12/31/2005 |  | 9/30/2005 |           | 6/30/2005 |   | 3/31/2005 | 
|                                                |  |                |           |            |   |           |  |           |           |           |   |            |  |           |           |           |   |          
|STOCK OPTION DETAILS:                           |  |                |           |            |   |           |  |           |           |           |   |            |  |           |           |           |   |           |  |   |           |  |   |           |  |   |           | 
|                                                |  |                |           |            |   |           |  |           |           |           |   |            |  |           |           |           |   |           |  |   |           |  |   |           |  |   |           | 
|Option shares outstanding (end of period)       |  |                | 1,892,675 |            |   | 1,913,425 |  |           | 1,787,175 |           |   | 1,759,425  |  |           | 1,415,750 |           |   | 1,413,750 |  |   | 1,446,250 |  |   | 1,402,750 |  |   | 1,370,250 | 
|                                                |  |                |           |            |   |           |  |           |           |           |   |            |  |           |           |           |   |           |  |   |           |  |   |           |  |   |           | 
|Average exercise price                          |  | $              | 9.16      |            | $ | 9.16      |  | $         | 9.17      |           | $ | 9.20       |  | $         | 9.47      |           | $ | 9.47      |  | $ | 9.48      |  | $ | 9.52      |  | $ | 9.52      | 
|                                                |  |                |           |            |   |           |  |           |           |           |   |            |  |           |           |           |   |           |  |   |           |  |   |           |  |   |           | 
|COMMON STOCK GRANT DETAILS:                     |  |                |           |            |   |           |  |           |           |           |   |            |  |           |           |           |   |           |  |   |           |  |   |           |  |   |           | 
|                                                |  |                |           |            |   |           |  |           |           |           |   |            |  |           |           |           |   |           |  |   |           |  |   |           |  |   |           | 
|Common stock grants outstanding (end of
period) |  |                | 142,044   |            |   | 139,948   |  |           | 137,452   |           |   | 135,062    |  |           | 129,187   |           |   | 54,357    |  |   | 34,134    |  | $ |          |  | $ |          | 
|                                                |  |                |           |            |   |           |  |           |           |           |   |            |  |           |           |           |   |           |  |   |           |  |   |           |  |   |           | 
|Average grant price                             |  | $              | 8.33      |            | $ | 8.32      |  | $         | 8.31      |           | $ | 8.33       |  | $         | 8.34      |           | $ | 8.86      |  | $ | 8.83      |  | $ |          |  | $ |          | 
|                                                |  |                |           |            |   |           |  |           |           |           |   |            |  |           |           |           |   |           |  |   |           |  |   |           |  |   |           | 
|SHARE BASED COMPENSATION EXPENSE:               |  |                |           |            |   |           |  |           |           |           |   |            |  |           |           |           |   |           |  |   |           |  |   |           |  |   |           | 
|                                                |  |                |           |            |   |           |  |           |           |           |   |            |  |           |           |           |   |           |  |   |           |  |   |           |  |   |           | 
|Quarter only                                    |  | $              | 376,678   |            | $ | 379,014   |  | $         | 371,855   |           | $ | 324,062    |  | $         | 303,951   |           | $ | 20,401    |  | $ | 10,375    |  | $ |          |  | $ |          | 
|                                                |  |                |           |            |   |           |  |           |           |           |   |            |  |           |           |           |   |           |  |   |           |  |   |           |  |   |           | 
|Year-to-date                                    |  | $              | 376,678   |            | $ | 1,378,882 |  | $         | 999,868   |           | $ | 628,013    |  | $         | 303,951   |           | $ | 30,776    |  | $ | 10,375    |  | $ |          |  | $ |          | 

11

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

Reclassification of quarterly operating earnings results to normalize for timing differences and unusual and temporary items
(in thousands, except per share data and percentages)

KMG - TOTAL COMPANY:

|                                                          |  |                 |         |            |   |           |   |           |       |           |   |            |   |           |       |           |   |       |   |   |       |   |   |       |  
|--------------------------------------------------------- |  | --------------- | ------- | ---------- | - | --------- | - | --------- | ----- | --------- | - | ---------- | - | --------- | ----- | --------- | - | ----- | - | - | ----- | - | - | ----- | -
|                                                          |  | Quarter
  Ended |        
|                                                          |  |                 |        
|Reported:                                                 |  | 3/31/2007       |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |       | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |       | 6/30/2005 |  
|                                                          |  |                 |         |            |   |           |   |           |       |           |   |            |   |           |       |           |  
|Operating income                                          |  | $               | (10,191 | )          | $ | 2,386     |   | $         | 2,139 |           | $ | 1,052      |   | $         | 1,227 |           | $ | 1,463 |   | $ | 1,249 |   | $ | 702   |  
|EPS - fully
  diluted                                     |  | $               | (0.46   | )          | $ | 0.11      |   | $         | 0.10  |           | $ | 0.05       |   | $         | 0.06  |           | $ | 0.07  |   | $ | 0.06  |   | $ | 0.03  |  
|Annualized ROE *                                          |  |                 | -21.0   | %          |   | 4.8       | % |           | 4.4   | %         |   | 2.2        | % |           | 2.5   | %         |   | 3.1   | % |   | 2.6   | % |   | 1.5   | %
|Normalized
  operating earnings adjustments, after tax ** |  | $               | 9,898   |            | $ | (363      | ) | $         | (497  | )         | $ | (450       | ) | $         | (79   | )         | $ | 189   |   | $ | 156   |   | $ | 758   |  
|                                                          |  |                 |         |            |   |           |   |           |       |           |   |            |   |           |       |           |   |       |   |   |       |   |   |       |  
|                                                          |  |                 |         |            |   |           |   |           |       |           |   |            |   |           |       |           |   |       |   |   |       |   |   |       |  
|Normalized
  Adjusted Baseline                            |  |                 |         |            |   |           |   |           |       |           |   |            |   |           |       |           |   |       |   |   |       |   |   |       |  
|Operating income                                          |  | $               | (293    | )          | $ | 2,023     |   | $         | 1,643 |           | $ | 602        |   | $         | 1,148 |           | $ | 1,653 |   | $ | 1,405 |   | $ | 1,460 |  
|EPS - fully
  diluted                                     |  | $               | (0.01   | )          | $ | 0.09      |   | $         | 0.07  |           | $ | 0.03       |   | $         | 0.05  |           | $ | 0.07  |   | $ | 0.06  |   | $ | 0.07  |  
|Annualized ROE *                                          |  |                 | -0.6    | %          |   | 4.1       | % |           | 3.3   | %         |   | 1.2        | % |           | 2.4   | %         |   | 3.4   | % |   | 3.0   | % |   | 3.1   | %

KANAWHA
LEGACY ACTIVITY:

|                                                          |  |                 |       |            |   |           |   |           |       |           |   |            |   |           |       |           |   |       |   |   |       |   |   |       |  
|--------------------------------------------------------- |  | --------------- | ----- | ---------- | - | --------- | - | --------- | ----- | --------- | - | ---------- | - | --------- | ----- | --------- | - | ----- | - | - | ----- | - | - | ----- | -
|                                                          |  | Quarter
  Ended |      
|                                                          |  |                 |      
|Reported:                                                 |  | 3/31/2007       |       | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |       | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |       | 6/30/2005 |  
|                                                          |  |                 |       |            |   |           |   |           |       |           |   |            |   |           |       |           |  
|Operating income                                          |  | $               | 2,714 |            | $ | 5,747     |   | $         | 4,293 |           | $ | 3,557      |   | $         | 3,583 |           | $ | 3,685 |   | $ | 3,451 |   | $ | 3,311 |  
|EPS                                                       |  | $               | 0.12  |            | $ | 0.26      |   | $         | 0.19  |           | $ | 0.16       |   | $         | 0.16  |           | $ | 0.17  |   | $ | 0.16  |   | $ | 0.15  |  
|Annualized ROE *                                          |  |                 | 5.8   | %          |   | 12.6      | % |           | 9.7   | %         |   | 8.2        | % |           | 8.4   | %         |   | 8.9   | % |   | 8.5   | % |   | 8.3   | %
|Normalized
  operating earnings adjustments, after tax ** |  | $               | (91   | )          | $ | (714      | ) | $         | (91   | )         | $ | 145        |   | $         | 586   |           | $ | (50   | ) | $ | (174  | ) | $ | 91    |  
|                                                          |  |                 |       |            |   |           |   |           |       |           |   |            |   |           |       |           |   |       |   |   |       |   |   |       |  
|                                                          |  |                 |       |            |   |           |   |           |       |           |   |            |   |           |       |           |   |       |   |   |       |   |   |       |  
|Normalized
  Adjusted Baseline                            |  |                 |       |            |   |           |   |           |       |           |   |            |   |           |       |           |   |       |   |   |       |   |   |       |  
|Operating income                                          |  | $               | 2,623 |            | $ | 5,032     |   | $         | 4,202 |           | $ | 3,702      |   | $         | 4,169 |           | $ | 3,635 |   | $ | 3,276 |   | $ | 3,402 |  
|EPS - fully diluted                                       |  | $               | 0.12  |            | $ | 0.23      |   | $         | 0.19  |           | $ | 0.17       |   | $         | 0.19  |           | $ | 0.16  |   | $ | 0.15  |   | $ | 0.15  |  
|Annualized ROE *                                          |  |                 | 5.6   | %          |   | 11.0      | % |           | 9.5   | %         |   | 8.5        | % |           | 9.8   | %         |   | 8.7   | % |   | 8.1   | % |   | 8.5   | %

NEW LARGE
CASE ACTIVITY:

|                                                          |  |                 |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|--------------------------------------------------------- |  | --------------- | ------- | ---------- | - | --------- | - | --------- | ------ | --------- | - | ---------- | - | --------- | ------ | --------- | - | ------ | - | - | ------ | - | - | ------ | -
|                                                          |  | Quarter
  Ended |        
|                                                          |  |                 |        
|Reported:                                                 |  | 3/31/2007       |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |        | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |        | 6/30/2005 |  
|                                                          |  |                 |         |            |   |           |   |           |        |           |   |            |   |           |        |           |  
|Operating income                                          |  | $               | (12,905 | )          | $ | (3,361    | ) | $         | (2,153 | )         | $ | (2,504     | ) | $         | (2,356 | )         | $ | (2,222 | ) | $ | (2,202 | ) | $ | (2,610 | )
|EPS - fully diluted                                       |  | $               | (0.58   | )          | $ | (0.15     | ) | $         | (0.09  | )         | $ | (0.11      | ) | $         | (0.10  | )         | $ | (0.10  | ) | $ | (0.10  | ) | $ | (0.12  | )
|Normalized
  operating earnings adjustments, after tax ** |  | $               | 9,989   |            | $ | 351       |   | $         | (406   | )         | $ | (595       | ) | $         | (665   | )         | $ | 239    |   | $ | 331    |   | $ | 668    |  
|                                                          |  |                 |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|                                                          |  |                 |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Normalized
  Adjusted Baseline                            |  |                 |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Operating income                                          |  | $               | (2,916  | )          | $ | (3,009    | ) | $         | (2,559 | )         | $ | (3,100     | ) | $         | (3,021 | )         | $ | (1,982 | ) | $ | (1,871 | ) | $ | (1,942 | )
|EPS - fully diluted                                       |  | $               | (0.13   | )          | $ | (0.14     | ) | $         | (0.12  | )         | $ | (0.14      | ) | $         | (0.14  | )         | $ | (0.09  | ) | $ | (0.08  | ) | $ | (0.09  | )

|   |                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------
|*  | See page 17 for GAAP equity
  roll forward and allocation between Kanawha Legacy and New Large Case
  Activity
|  
|** | See page 14-16 for detailed
  description of unusual items                                                    

12

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

Reclassification of year-to-date operating earnings results to normalize for timing differences and unusual and temporary items(in thousands, except per share data and percentages)

KMG - TOTAL COMPANY:

|                                                          |  |              |         |            |   |           |   |           |        |           |   |            |   |           |       |           |   |       |   |   |       |   |   |       |  
|--------------------------------------------------------- |  | ------------ | ------- | ---------- | - | --------- | - | --------- | ------ | --------- | - | ---------- | - | --------- | ----- | --------- | - | ----- | - | - | ----- | - | - | ----- | -
|                                                          |  | Year-to-Date |        
|                                                          |  |              |        
|Reported:                                                 |  | 3/31/2007    |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |        | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |       | 6/30/2005 |  
|                                                          |  |              |         |            |   |           |   |           |        |           |   |            |   |           |       |           |  
|Operating income                                          |  | $            | (10,191 | )          | $ | 6,805     |   | $         | 4,418  |           | $ | 2,279      |   | $         | 1,227 |           | $ | 4,416 |   | $ | 2,953 |   | $ | 1,704 |  
|EPS - fully
  diluted                                     |  | $            | (0.46   | )          | $ | 0.31      |   | $         | 0.20   |           | $ | 0.10       |   | $         | 0.06  |           | $ | 0.20  |   | $ | 0.13  |   | $ | 0.08  |  
|Annualized ROE *                                          |  |              | -21.0   | %          |   | 3.5       | % |           | 3.0    | %         |   | 2.4        | % |           | 2.5   | %         |   | 2.3   | % |   | 2.1   | % |   | 1.8   | %
|Normalized
  operating earnings adjustments, after tax ** |  | $            | 9,898   |            | $ | (1,389    | ) | $         | (1,026 | )         | $ | (529       | ) | $         | (79   | )         | $ | 1,456 |   | $ | 1,217 |   | $ | 887   |  
|                                                          |  |              |         |            |   |           |   |           |        |           |   |            |   |           |       |           |   |       |   |   |       |   |   |       |  
|                                                          |  |              |         |            |   |           |   |           |        |           |   |            |   |           |       |           |   |       |   |   |       |   |   |       |  
|Normalized
  Adjusted Baseline                            |  |              |         |            |   |           |   |           |        |           |   |            |   |           |       |           |   |       |   |   |       |   |   |       |  
|Operating income                                          |  | $            | (293    | )          | $ | 5,416     |   | $         | 3,393  |           | $ | 1,750      |   | $         | 1,148 |           | $ | 5,873 |   | $ | 4,170 |   | $ | 2,591 |  
|EPS - fully
  diluted                                     |  | $            | (0.01   | )          | $ | 0.24      |   | $         | 0.15   |           | $ | 0.08       |   | $         | 0.05  |           | $ | 0.27  |   | $ | 0.19  |   | $ | 0.12  |  
|Annualized ROE *                                          |  |              | -0.6    | %          |   | 2.8       | % |           | 2.3    | %         |   | 1.8        | % |           | 2.4   | %         |   | 3.1   | % |   | 2.9   | % |   | 2.7   | %

KANAWHA
LEGACY ACTIVITY:

|                                                          |  |              |       |            |   |           |   |           |        |           |   |            |   |           |       |           |   |        |   |   |       |   |   |       |  
|--------------------------------------------------------- |  | ------------ | ----- | ---------- | - | --------- | - | --------- | ------ | --------- | - | ---------- | - | --------- | ----- | --------- | - | ------ | - | - | ----- | - | - | ----- | -
|                                                          |  | Year-to-Date |      
|                                                          |  |              |      
|Reported:                                                 |  | 3/31/2007    |       | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |        | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |       | 6/30/2005 |  
|                                                          |  |              |       |            |   |           |   |           |        |           |   |            |   |           |       |           |  
|Operating income                                          |  | $            | 2,714 |            | $ | 17,179    |   | $         | 11,432 |           | $ | 7,139      |   | $         | 3,583 |           | $ | 13,039 |   | $ | 9,354 |   | $ | 5,904 |  
|EPS - fully diluted                                       |  | $            | 0.12  |            | $ | 0.77      |   | $         | 0.51   |           | $ | 0.32       |   | $         | 0.16  |           | $ | 0.59   |   | $ | 0.42  |   | $ | 0.27  |  
|Annualized ROE *                                          |  |              | 5.8   | %          |   | 9.6       | % |           | 8.8    | %         |   | 8.3        | % |           | 8.4   | %         |   | 8.1    | % |   | 7.8   | % |   | 7.5   | %
|Normalized
  operating earnings adjustments, after tax ** |  | $            | (91   | )          | $ | (74       | ) | $         | 640    |           | $ | 731        |   | $         | 586   |           | $ |       |   | $ |      |   | $ |      |  
|                                                          |  |              |       |            |   |           |   |           |        |           |   |            |   |           |       |           |   |        |   |   |       |   |   |       |  
|                                                          |  |              |       |            |   |           |   |           |        |           |   |            |   |           |       |           |   |        |   |   |       |   |   |       |  
|Normalized
  Adjusted Baseline                            |  |              |       |            |   |           |   |           |        |           |   |            |   |           |       |           |   |        |   |   |       |   |   |       |  
|Operating income                                          |  | $            | 2,623 |            | $ | 17,105    |   | $         | 12,072 |           | $ | 7,870      |   | $         | 4,169 |           | $ | 13,039 |   | $ | 9,354 |   | $ | 5,904 |  
|EPS - fully diluted                                       |  | $            | 0.12  |            | $ | 0.77      |   | $         | 0.54   |           | $ | 0.35       |   | $         | 0.19  |           | $ | 0.59   |   | $ | 0.42  |   | $ | 0.27  |  
|Annualized ROE *                                          |  |              | 5.6   | %          |   | 9.6       | % |           | 9.3    | %         |   | 9.2        | % |           | 9.8   | %         |   | 8.1    | % |   | 7.8   | % |   | 7.5   | %

NEW LARGE
CASE ACTIVITY:

|                                                          |  |              |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|--------------------------------------------------------- |  | ------------ | ------- | ---------- | - | --------- | - | --------- | ------ | --------- | - | ---------- | - | --------- | ------ | --------- | - | ------ | - | - | ------ | - | - | ------ | -
|                                                          |  | Year-to-Date |        
|                                                          |  |              |        
|Reported:                                                 |  | 3/31/2007    |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |        | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |        | 6/30/2005 |  
|                                                          |  |              |         |            |   |           |   |           |        |           |   |            |   |           |        |           |  
|Operating income                                          |  | $            | (12,905 | )          | $ | (10,374   | ) | $         | (7,014 | )         | $ | (4,860     | ) | $         | (2,356 | )         | $ | (8,623 | ) | $ | (6,401 | ) | $ | (4,200 | )
|EPS - fully diluted                                       |  | $            | (0.58   | )          | $ | (0.47     | ) | $         | (0.31  | )         | $ | (0.22      | ) | $         | (0.10  | )         | $ | (0.39  | ) | $ | (0.29  | ) | $ | (0.19  | )
|Normalized
  operating earnings adjustments, after tax ** |  | $            | 9,989   |            | $ | (1,315    | ) | $         | (1,666 | )         | $ | (1,260     | ) | $         | (665   | )         | $ | 1,456  |   | $ | 1,217  |   | $ | 887    |  
|                                                          |  |              |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|                                                          |  |              |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Normalized
  Adjusted Baseline                            |  |              |         |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Operating income                                          |  | $            | (2,916  | )          | $ | (11,689   | ) | $         | (8,679 | )         | $ | (6,120     | ) | $         | (3,021 | )         | $ | (7,167 | ) | $ | (5,184 | ) | $ | (3,313 | )
|EPS - fully diluted                                       |  | $            | (0.13   | )          | $ | (0.53     | ) | $         | (0.39  | )         | $ | (0.28      | ) | $         | (0.14  | )         | $ | (0.32  | ) | $ | (0.23  | ) | $ | (0.15  | )

|   |                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------
|*  | See page 17 for GAAP equity
  roll forward and allocation between Kanawha Legacy and New Large Case
  Activity
|  
|** | See page 14-16 for detailed
  description of unusual items                                                    

13

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

DETAILS ON NORMALIZING OPERATING EARNINGS ADJUSTMENTS
($ in thousands)

|                                                            |  |                             |  |                 |       |            |   |           |   |           |        |           |   |            |   |           |      |           |   |       |   |   |       |   |   |     | 
|----------------------------------------------------------- |  | --------------------------- |  | --------------- | ----- | ---------- | - | --------- | - | --------- | ------ | --------- | - | ---------- | - | --------- | ---- | --------- | - | ----- | - | - | ----- | - | - | --- | 
|                                                            |  |                             |  | Quarter
  Ended |      
|                                                            |  |                             |  |                 |      
|                                                            |  |                             |  | 3/31/2007       |       | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |        | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |      | 6/30/2005 |  
|                                                            |  |                             |  |                 |       |            |   |           |   |           |        |           |   |            |   |           |      |           |  
|Normalization
  for unusual items (after tax):              |  | Segment
  Reported          |  |                 |       |            |   |           |   |           |        |           |   |            |   |           |      |           |   |       |   |   |       |   |   |     | 
|Premium refund
  (a)                                        |  | Legacy - worksite           |  | $               |      |            | $ |          |   | $         | (211   | )         | $ |           |   | $         | 211  |           | $ |      |   | $ |      |   | $ |    | 
|Reserve mismatch
  (b)                                      |  | Legacy - worksite           |  |                 |      |            |   |          |   |           |       |           |   | (176       | ) |           | 176  |           |   |      |   |   |      |   |   |    | 
|Indemnification
  of items related to initial VOBA (c)      |  | Legacy - corporate          |  |                 |      |            |   |          |   |           | (196   | )         |   |           |   |           |     |           |   |      |   |   |      |   |   |    | 
|Dynamic VOBA
  adjustment (d)                               |  | Legacy - all except
  Corp. |  |                 | (91   | )          |   | (485      | ) |           | 240    |           |   | 245        |   |           | 123  |           |   | (50   | ) |   | (174  | ) |   | 91  | 
|LTC reserves (e)                                            |  | Legacy - senior             |  |                 |      |            |   | (229      | ) |           | 76     |           |   | 76         |   |           | 76   |           |   |      |   |   |      |   |   |    | 
|                                                            |  |                             |  |                 |       |            |   |           |   |           |        |           |   |            |   |           |      |           |   |       |   |   |       |   |   |     | 
|Subtotal Kanawha
  legacy adjustments                       |  |                             |  |                 | (91   | )          |   | (714      | ) |           | (91    | )         |   | 145        |   |           | 586  |           |   | (50   | ) |   | (174  | ) |   | 91  | 
|                                                            |  |                             |  |                 |       |            |   |           |   |           |        |           |   |            |   |           |      |           |   |       |   |   |       |   |   |     | 
|Excess stop loss
  claims (f)                               |  | Large case - worksite       |  |                 | 2,399 |            |   | 400       |   |           | (362   | )         |   | (986       | ) |           | (942 | )         |   | (305  | ) |   | (210  | ) |   | 8   | 
|Discount on
  subordinated note payoff (g)                  |  | Large case - corporate      |  |                 |      |            |   | (581      | ) |           | 83     |           |   | 83         |   |           | 83   |           |   | 83    |   |   | 83    |   |   | 83  | 
|Valuation tax
  allowance for deferred tax asset (h)        |  | Large case - corporate      |  |                 | 6,544 |            |   |          |   |           |       |           |   |           |   |           |     |           |   |      |   |   |      |   |   |    | 
|Miscellaneous
  expenses (i)                                |  | Large case - worksite       |  |                 |      |            |   | 180       |   |           | (60    | )         |   | (60        | ) |           | (60  | )         |   |      |   |   |      |   |   |    | 
|Short-term
  initial expenses (j)                           |  | Large case - corporate      |  |                 | 1,047 |            |   | 352       |   |           | (66    | )         |   | 368        |   |           | 254  |           |   | 461   |   |   | 458   |   |   | 577 | 
|                                                            |  |                             |  |                 |       |            |   |           |   |           |        |           |   |            |   |           |      |           |   |       |   |   |       |   |   |     | 
|Subtotal new
  large case activity adjustments              |  |                             |  |                 | 9,989 |            |   | 351       |   |           | (406   | )         |   | (595       | ) |           | (665 | )         |   | 239   |   |   | 331   |   |   | 668 | 
|                                                            |  |                             |  |                 |       |            |   |           |   |           |        |           |   |            |   |           |      |           |   |       |   |   |       |   |   |     | 
|                                                            |  |                             |  |                 |       |            |   |           |   |           |        |           |   |            |   |           |      |           |   |       |   |   |       |   |   |     | 
|Total
  quarterly normalization adjustments, after-tax      |  |                             |  | $               | 9,898 |            | $ | (363      | ) | $         | (497   | )         | $ | (450       | ) | $         | (79  | )         | $ | 189   |   | $ | 156   |   | $ | 758 | 
|                                                            |  |                             |  |                 |       |            |   |           |   |           |        |           |   |            |   |           |      |           |   |       |   |   |       |   |   |     | 
|                                                            |  |                             |  |                 |       |            |   |           |   |           |        |           |   |            |   |           |      |           |   |       |   |   |       |   |   |     | 
|Year-to-date
  summary of normalized adjustments, after-tax |  |                             |  |                 |       |            |   |           |   |           |        |           |   |            |   |           |      |           |   |       |   |   |       |   |   |     | 
|Kanawha legacy adjustments                                  |  |                             |  | $               | (91   | )          | $ | (74       | ) | $         | 640    |           | $ | 731        |   | $         | 586  |           | $ |      |   | $ |      |   | $ |    | 
|New large case
  activity adjustments                       |  |                             |  |                 | 9,989 |            |   | (1,315    | ) |           | (1,666 | )         |   | (1,260     | ) |           | (665 | )         |   | 1,456 |   |   | 1,217 |   |   | 887 | 
|                                                            |  |                             |  |                 |       |            |   |           |   |           |        |           |   |            |   |           |      |           |   |       |   |   |       |   |   |     | 
|Total
  year-to-date normalization adjustments, after-tax   |  |                             |  | $               | 9,898 |            | $ | (1,389    | ) | $         | (1,026 | )         | $ | (529       | ) | $         | (79  | )         | $ | 1,456 |   | $ | 1,217 |   | $ | 887 | 
|                                                            |  |                             |  |                 |       |            |   |           |   |           |        |           |   |            |   |           |      |           |   |       |   |   |       |   |   |     | 

See pages 15-16 for
description of each adjustment.

14

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KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

DETAILS ON NORMALIZING OPERATING EARNINGS
ADJUSTMENTS (continued)

Description of adjustments:

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. | Premium
  refund  represents
  a pre-tax charge of $325,000 for a one-time premium refund in the first
  quarter of 2006 resulting from a mass cancellation of an older Kanawha policy
  form in the state of Georgia. An offsetting credit was recognized in the
  third quarter of 2006 as a result of an indemnification from the previous
  shareholders of Kanawha.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | b. | Reserve
  mismatch  relates
  to a $271,000 pre-tax charge in the first quarter of 2006 resulting from a
  mismatch of life insurance endowment benefits paid in cash and associated
  release of policy reserves. The related policy reserve release occurred in
  the second quarter of 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | c. | Indemnification
  of items related to initial VOBA  the indemnification from the previous shareholders of Kanawha
  recognized in the third quarter of 2006 included an additional $302,000
  pre-tax benefit related to items that were booked during 2005 as adjustments
  to the opening value of business acquired (VOBA) asset as of December 31,
  2004. As a result, the adjustments in 2005 did not directly relate to any
  reporting period in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | d. | Dynamic
  VOBA Adjustment 
  VOBA amortization includes a dynamic adjustment each quarter that reflects
  the impact of actual versus expected premium persistency, thereby introducing
  volatility into the quarterly results. In order to smooth this volatility,
  the quarterly dynamic adjustment has been identified and spread back to the
  previous 4 quarters for purposes of presenting normalized earnings. See page
  16 for further details.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | e. | LTC
  reserves  the
  Company refined its methodology for factor-based reserving for its block of
  LTC insurance policies resulting in a year-to-date catch up in the fourth
  quarter of 2006 of $470,000 that was spread back equally over the previous
  three quarters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | f. | Excess
  stop loss claims 
  the Company recognized increased claims in excess of pricing of $3.7 million
  in the first quarter of 2007, $2.2 million in the fourth quarter of 2006 and
  $850,000 in the third quarter of 2006. Since these increased claims relate to
  prior reported earned premium, these excess claims have been spread back to
  earlier quarters to better align with the premium recognition of those same
  cases in the periods earned. The Company has decided to increase loss reserve
  assumptions prospectively on all reported premiums subsequent to January 1,
  2007 to mitigate future volatility in this book of business. No normalization
  has been made for this change. See page 16 for further details.                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | g. | Discount
  on subordinated note payoff  the Company retired the $15 million subordinated note in the
  fourth quarter of 2006 and replaced it with bank debt. The Company incurred a
  pretax gain of $1,021,000 on the retirement of the subordinated note that it
  spread back to the periods over which it was due.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | h. | Valuation
  allowance on deferred tax asset  the Company established a valuation allowance against the portion
  of the deferred tax asset related to the holding company of $6.5 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | i. | Miscellaneous
  expenses  the
  Company incurred additional expense accruals in the fourth quarter of 2006 of
  $370,000 before taxes related to bonus accruals payable to sales reps and producers
  that were earned over the course of the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | j. | Short-term initial expenses
 the Company has incurred certain start-up expenses for compliance with federal securities laws in the first two years, and
ING litigation defense costs that are material but temporary in nature. Normalizing entries have been made in all
periods that have the effect of offsetting these temporary initial expenses. Because the Company received reimbursement of
$474,000 before taxes under its D&O insurance coverage in the third quarter of 2006 for its legal expenses incurred in current
and prior periods related to the ING litigation, the normalizing adjustment in the third quarter was a reduction in earnings as
reported. The Company also reached an agreement to settle the ING/Reliastar lawsuit for $825,000 on May 4, 2007. This settlement
has been included in the first quarter 2007 normalizing adjustment. The adjustment for federal securities law compliance expenses
relates to costs the Company incurred in 2005 and 2006 in excess of its estimate of $600,000 of annualized ongoing costs for
compliance in 2007 and in future periods when such costs are expected to stabilize.

15

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

DETAILS ON NORMALIZING OPERATING EARNINGS
ADJUSTMENTS (continued)

Calendarization details for stop loss excess claims and
dynamic VOBA adjustments
($ in thousands)

|                                        |  |              |        |           |                 |            |   |           |        |           |   |           |   |            |        |           |   |           |   |   |      |   |   |      |   |   |    | 
|--------------------------------------- |  | ------------ | ------ | --------- | --------------- | ---------- | - | --------- | ------ | --------- | - | --------- | - | ---------- | ------ | --------- | - | --------- | - | - | ---- | - | - | ---- | - | - | -- | 
|                                        |  |              |        |           | Quarter
  Ended
|                                        |  |              |        |           |                
|Stop loss
  excess claims             |  | Total Excess |        | 3/31/2007 |                 | 12/31/2006 |   | 9/30/2006 |        | 6/30/2006 |   | 3/31/2006 |   | 12/31/2005 |        | 9/30/2005 |   | 6/30/2005 |  
|                                        |  |              |        |           |                 |            |   |           |        |           |   |           |   |            |        |           |   |           |  
|2Q05                                    |  | $            | 25     |           | $               |           |   | $         |       |           | $ |          |   | $          |       |           | $ | 6         |   | $ | 6    |   | $ | 6    |   | $ | 6  | 
|3Q05                                    |  |              | (1,404 | )         |                 |           |   |           |       |           |   |          |   |            | (351   | )         |   | (351      | ) |   | (351 | ) |   | (351 | ) |   |   | 
|4Q05                                    |  |              | (758   | )         |                 |           |   |           |       |           |   | (189      | ) |            | (189   | )         |   | (189      | ) |   | (189 | ) |   |     |   |   |   | 
|1Q06                                    |  |              | (4,065 | )         |                 |           |   |           | (1,016 | )         |   | (1,016    | ) |            | (1,016 | )         |   | (1,016    | ) |   |     |   |   |     |   |   |   | 
|2Q06                                    |  |              | (168   | )         |                 |           |   |           | (56    | )         |   | (56       | ) |            | (56    | )         |   |          |   |   |     |   |   |     |   |   |   | 
|3Q06                                    |  |              | (451   | )         |                 |           |   |           | (226   | )         |   | (226      | ) |            |       |           |   |          |   |   |     |   |   |     |   |   |   | 
|4Q06                                    |  |              | (292   | )         |                 |           |   |           | (292   | )         |   |          |   |            |       |           |   |          |   |   |     |   |   |     |   |   |   | 
|Aggregate gains                         |  |              | 404    |           |                 |           |   |           | 36     |           |   | 80        |   |            | 96     |           |   | 101       |   |   | 66   |   |   | 21   |   |   | 6  | 
|                                        |  |              |        |           |                 |            |   |           |        |           |   |           |   |            |        |           |   |           |   |   |      |   |   |      |   |   |    | 
|Subtotal incurred                     |  |              | (6,709 | )         |                 |           |   |           | (1,554 | )         |   | (1,407    | ) |            | (1,517 | )         |   | (1,449    | ) |   | (469 | ) |   | (324 | ) |   | 12 | 
|Actual stop loss excess claims booked |  |              |        |           |                 | (3,690     | ) |           | (2,169 | )         |   | (850      | ) |            |       |           |   |          |   |   |     |   |   |     |   |   |   | 
|                                        |  |              |        |           |                 |            |   |           |        |           |   |           |   |            |        |           |   |           |   |   |      |   |   |      |   |   |    | 
|Adjustment to reported (pretax)         |  |              |        |           |                 | 3,690      |   |           | 615    |           |   | (557      | ) |            | (1,517 | )         |   | (1,449    | ) |   | (469 | ) |   | (324 | ) |   | 12 | 
|Adjustment to reported (aftertax)       |  |              |        |           | $               | 2,399      |   | $         | 400    |           | $ | (362      | ) | $          | (986   | )         | $ | (942      | ) | $ | (305 | ) | $ | (210 | ) | $ | 8  | 

|                                         |  |            |       |           |                 |            |   |           |      |           |   |           |   |            |      |           |   |           |   |   |     |   |   |      |   |   |     |  
|---------------------------------------- |  | ---------- | ----- | --------- | --------------- | ---------- | - | --------- | ---- | --------- | - | --------- | - | ---------- | ---- | --------- | - | --------- | - | - | --- | - | - | ---- | - | - | --- | -
|                                         |  |            |       |           | Quarter
  Ended
|                                         |  |            |       |           |                
|Dynamic
  VOBA adjustments               |  | Adjustment |       | 3/31/2007 |                 | 12/31/2006 |   | 9/30/2006 |      | 6/30/2006 |   | 3/31/2006 |   | 12/31/2005 |      | 9/30/2005 |   | 6/30/2005 |  
|                                         |  |            |       |           |                 |            |   |           |      |           |   |           |   |            |      |           |   |           |  
|3Q05                                     |  | $          | 383   |           | $               |           |   | $         |     |           | $ |          |   | $          |     |           | $ |          |   | $ |    |   | $ | 128  |   | $ | 128 |  
|4Q05                                     |  |            | 118   |           |                 |           |   |           |     |           |   |          |   |            |     |           |   |          |   |   | 30  |   |   | 30   |   |   | 30  |  
|1Q06                                     |  |            | (70   | )         |                 |           |   |           |     |           |   |          |   |            |     |           |   | (18       | ) |   | (18 | ) |   | (18  | ) |   | (18 | )
|2Q06                                     |  |            | (98   | )         |                 |           |   |           |     |           |   |          |   |            | (24  | )         |   | (24       | ) |   | (24 | ) |   | (24  | ) |   |    |  
|3Q06                                     |  |            | 216   |           |                 |           |   |           |     |           |   | 54        |   |            | 54   |           |   | 54        |   |   | 54  |   |   |     |   |   |    |  
|4Q06                                     |  |            | 459   |           |                 |           |   |           | 115  |           |   | 115       |   |            | 115  |           |   | 115       |   |   |    |   |   |     |   |   |    |  
|1Q07                                     |  |            | 187   |           |                 | 47         |   |           | 47   |           |   | 47        |   |            | 47   |           |   |          |   |   |    |   |   |     |   |   |    |  
|                                         |  |            |       |           |                 |            |   |           |      |           |   |           |   |            |      |           |   |           |   |   |     |   |   |      |   |   |     |  
|Subtotal incurred                      |  |            | 1,194 |           |                 | 47         |   |           | 161  |           |   | 215       |   |            | 191  |           |   | 126       |   |   | 41  |   |   | 115  |   |   | 140 |  
|Actual dynamic VOBA adjustments reported |  |            | 1,194 |           |                 | 187        |   |           | 908  |           |   | (154      | ) |            | (186 | )         |   | (63       | ) |   | 118 |   |   | 383  |   |   |    |  
|                                         |  |            |       |           |                 |            |   |           |      |           |   |           |   |            |      |           |   |           |   |   |     |   |   |      |   |   |     |  
|Adjustment to reported (pretax)          |  |            |       |           |                 | (140       | ) |           | (746 | )         |   | 369       |   |            | 376  |           |   | 189       |   |   | (77 | ) |   | (268 | ) |   | 140 |  
|Adjustment to reported (aftertax)        |  |            |       |           | $               | (91        | ) | $         | (485 | )         | $ | 240       |   | $          | 245  |           | $ | 123       |   | $ | (50 | ) | $ | (174 | ) | $ | 91  |  

16

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

Development of GAAP Equity for ROE
Calculations
($ in thousands)

|                                                                   |  |                 |          |            |   |           |   |           |          |           |   |            |   |           |          |           |   |           |   |   |          |   |   |          |   |   |          |  
|------------------------------------------------------------------ |  | --------------- | -------- | ---------- | - | --------- | - | --------- | -------- | --------- | - | ---------- | - | --------- | -------- | --------- | - | --------- | - | - | -------- | - | - | -------- | - | - | -------- | -
|                                                                   |  | Quarter
  Ended |         
|                                                                   |  |                 |         
|KMG - total
  company                                              |  | 3/31/2007       |          | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |          | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |          | 6/30/2005 |   | 3/31/2005 |  
|                                                                   |  |                 |          |            |   |           |   |           |          |           |   |            |   |           |          |           |   |           |  
|KMG reported net income -
  quarter only                           |  | $               | (10,263  | )          | $ | 2,939     |   | $         | 2,026    |           | $ | 1,017      |   | $         | 1,236    |           | $ | 1,588     |   | $ | 1,338    |   | $ | 714      |   | $ | 1,020    |  
|Reported GAAP equity                                               |  |                 | 182,653  |            |   | 192,052   |   |           | 189,967  |           |   | 176,352    |   |           | 181,083  |           |   | 187,483   |   |   | 187,774  |   |   | 194,411  |   |   | 184,440  |  
|Excluding FAS 115 g/(l) ***                                        |  |                 | (6,565   | )          |   | (7,053    | ) |           | (7,790   | )         |   | (19,008    | ) |           | (12,935  | )         |   | (4,995    | ) |   | (3,096   | ) |   | 4,889    |   |   | (4,368   | )
|                                                                   |  |                 |          |            |   |           |   |           |          |           |   |            |   |           |          |           |   |           |   |   |          |   |   |          |   |   |          |  
|GAAP equity excluding FAS 115
  - ending ***                       |  |                 | 189,218  |            |   | 199,105   |   |           | 197,757  |           |   | 195,360    |   |           | 194,018  |           |   | 192,478   |   |   | 190,870  |   |   | 189,522  |   |   | 188,808  |  
|GAAP equity excluding FAS 115
  - average quarter only ***         |  |                 | 194,162  |            |   | 198,431   |   |           | 196,558  |           |   | 194,689    |   |           | 193,248  |           |   | 191,674   |   |   | 190,196  |   |   | 189,165  |   |   | 188,298  |  
|GAAP equity excluding FAS 115
  - year-to-date ***                 |  |                 | 194,162  |            |   | 195,744   |   |           | 194,903  |           |   | 193,952    |   |           | 193,248  |           |   | 189,893   |   |   | 189,247  |   |   | 188,706  |   |   | 188,298  |  
|                                                                   |  |                 |          |            |   |           |   |           |          |           |   |            |   |           |          |           |   |           |   |   |          |   |   |          |   |   |          |  
|Kanawha
  legacy activity:                                         |  |                 |          |            |   |           |   |           |          |           |   |            |   |           |          |           |   |           |   |   |          |   |   |          |   |   |          |  
|Net income - quarter only *                                        |  | $               | 2,655    |            | $ | 6,300     |   | $         | 4,180    |           | $ | 3,521      |   | $         | 3,592    |           | $ | 3,810     |   | $ | 3,540    |   | $ | 3,324    |   | $ | 2,610    |  
|Attributed GAAP equity **                                          |  |                 | 188,531  |            |   | 185,876   |   |           | 179,576  |           |   | 175,396    |   |           | 171,875  |           |   | 168,283   |   |   | 164,473  |   |   | 160,934  |   |   | 157,610  |  
|Attributed GAAP equity -
  average quarter only                    |  |                 | 187,203  |            |   | 182,726   |   |           | 177,486  |           |   | 173,635    |   |           | 170,079  |           |   | 166,378   |   |   | 162,704  |   |   | 159,272  |   |   | 156,305  |  
|Attributed GAAP equity -
  year-to-date                            |  |                 | 187,203  |            |   | 176,201   |   |           | 173,782  |           |   | 171,851    |   |           | 170,079  |           |   | 161,260   |   |   | 159,504  |   |   | 157,848  |   |   | 156,305  |  
|                                                                   |  |                 |          |            |   |           |   |           |          |           |   |            |   |           |          |           |   |           |   |   |          |   |   |          |   |   |          |  
|New large
  case activity:                                         |  |                 |          |            |   |           |   |           |          |           |   |            |   |           |          |           |   |           |   |   |          |   |   |          |   |   |          |  
|GAAP equity excluding FAS 115
  - ending ***                       |  | $               | 189,218  |            | $ | 199,105   |   | $         | 197,757  |           | $ | 195,360    |   | $         | 194,018  |           | $ | 192,478   |   | $ | 190,870  |   | $ | 189,522  |   | $ | 188,808  |  
|Less GAAP equity attributed to
  Kanawha legacy                    |  |                 | (188,531 | )          |   | (185,876  | ) |           | (179,576 | )         |   | (175,396   | ) |           | (171,875 | )         |   | (168,283  | ) |   | (164,473 | ) |   | (160,934 | ) |   | (157,610 | )
|                                                                   |  |                 |          |            |   |           |   |           |          |           |   |            |   |           |          |           |   |           |   |   |          |   |   |          |   |   |          |  
|Equals GAAP equity attributed
  to new large case activity         |  |                 | 700      |            |   | 13,229    |   |           | 18,181   |           |   | 19,964     |   |           | 22,144   |           |   | 24,195    |   |   | 26,397   |   |   | 28,588   |   |   | 31,198   |  
|Attributed GAAP equity -
  average quarter only                    |  |                 | 6,965    |            |   | 15,705    |   |           | 19,072   |           |   | 21,054     |   |           | 23,169   |           |   | 25,296    |   |   | 27,492   |   |   | 29,893   |   |   | 31,993   |  
|Attributed GAAP equity -
  year-to-date                            |  |                 | 6,965    |            |   | 19,543    |   |           | 21,121   |           |   | 22,101     |   |           | 23,169   |           |   | 28,633    |   |   | 29,743   |   |   | 30,858   |   |   | 31,993   |  
|                                                                   |  |                 |          |            |   |           |   |           |          |           |   |            |   |           |          |           |   |           |   |   |          |   |   |          |   |   |          |  
|                                                                   |  |                 |          |            |   |           |   |           |          |           |   |            |   |           |          |           |   |           |   |   |          |   |   |          |   |   |          |  
|* Development of Kanawha legacy net income for equity
roll-forward |  |                 |          |            |   |           |   |           |          |           |   |            |   |           |          |           |   |           |   |  
|KMG reported net income                                            |  | $               | (10,263  | )          | $ | 2,939     |   | $         | 2,026    |           | $ | 1,017      |   | $         | 1,236    |           | $ | 1,588     |   | $ | 1,338    |   | $ | 714      |   | $ | 1,020    |  
|Less Large case new activity
  operating income                    |  |                 | (12,905  | )          |   | (3,361    | ) |           | (2,153   | )         |   | (2,504     | ) |           | (2,356   | )         |   | (2,222    | ) |   | (2,202   | ) |   | (2,610   | ) |   | (1,590   | )
|                                                                   |  |                 |          |            |   |           |   |           |          |           |   |            |   |           |          |           |   |           |   |   |          |   |   |          |   |   |          |  
|Kanawha legacy net income
  (retained earnings)                    |  | $               | 2,642    |            | $ | 6,300     |   | $         | 4,180    |           | $ | 3,521      |   | $         | 3,592    |           | $ | 3,810     |   | $ | 3,540    |   | $ | 3,324    |   | $ | 2,610    |  

** Allocation
of initial GAAP equity attributed to the Kanawha legacy business is estimated
at $155 million, consisting of the purchase price of $145 million plus the
initial $10 million infusion into Kanawha insurance company to maintain
statutory surplus. The equity balances going forward take into account the
retained earnings reported by the Kanawha legacy business. The difference
between total KMG reported GAAP equity (net of FAS 115 gains/losses) and GAAP
equity attributed to Kanawha legacy activity is attributed to the new large
case activity.

*** FAS 115
reflects the mark-to-market adjustment for available-for-sale securities that
are included in other comprehensive income but are excluded from GAAP equity
above.

17

---



KMG
America Corporation 
Quarterly Financial Supplement 
First Quarter 2007

Consolidated GAAP Balance Sheets
(in thousands, except share data)

|                                                                                    |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|----------------------------------------------------------------------------------- |  | ------------- | ------- | ---------- | - | --------- |  | --------- | ------- | --------- | - | ---------- |  | --------- | ------- | --------- | - | ------- |  | - | ------- |  | - | ------- | 
|                                                                                    |  | Quarter Ended |        
|                                                                                    |  |               |        
|                                                                                    |  | 3/31/2007     |         | 12/31/2006 |   | 9/30/2006 |  | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |  | 9/30/2005 |         | 6/30/2005 |  
|                                                                                    |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |  
|Assets:                                                                             |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |  
|Cash and cash equivalents                                                           |  | $             | 45,730  |            | $ | 21,744    |  | $         | 11,271  |           | $ | 6,946      |  | $         | 11,361  |           | $ | 32,583  |  | $ | 17,624  |  | $ | 15,092  | 
|Investments                                                                         |  |               | 575,635 |            |   | 558,336   |  |           | 564,631 |           |   | 542,908    |  |           | 549,859 |           |   | 543,307 |  |   | 575,220 |  |   | 574,236 | 
|                                                                                    |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|Total cash and investments                                                          |  |               | 621,365 |            |   | 580,080   |  |           | 575,902 |           |   | 549,854    |  |           | 561,220 |           |   | 575,890 |  |   | 592,844 |  |   | 589,328 | 
|Accrued investment income                                                           |  |               | 6,740   |            |   | 6,503     |  |           | 6,422   |           |   | 6,051      |  |           | 5,997   |           |   | 5,917   |  |   | 5,262   |  |   | 5,805   | 
|DAC                                                                                 |  |               | 31,813  |            |   | 28,454    |  |           | 24,548  |           |   | 21,250     |  |           | 17,543  |           |   | 14,032  |  |   | 10,306  |  |   | 6,357   | 
|VOBA                                                                                |  |               | 69,671  |            |   | 70,766    |  |           | 70,794  |           |   | 70,760     |  |           | 71,761  |           |   | 72,639  |  |   | 72,743  |  |   | 73,101  | 
|Other assets *                                                                      |  |               | 139,995 |            |   | 145,911   |  |           | 144,247 |           |   | 146,782    |  |           | 137,395 |           |   | 128,887 |  |   | 120,968 |  |   | 114,939 | 
|                                                                                    |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|Total assets                                                                        |  | $             | 869,584 |            | $ | 831,714   |  | $         | 821,913 |           | $ | 794,697    |  | $         | 793,916 |           | $ | 797,365 |  | $ | 802,123 |  | $ | 789,530 | 
|                                                                                    |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|                                                                                    |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|Liabilities and shareholders equity:                                               |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|Total policy and contract liabilities                                               |  | $             | 584,424 |            | $ | 572,364   |  | $         | 567,862 |           | $ | 560,569    |  | $         | 554,727 |           | $ | 547,894 |  | $ | 543,069 |  | $ | 537,593 | 
|Deferred income taxes                                                               |  |               | 13,707  |            |   | 14,735    |  |           | 14,404  |           |   | 7,165      |  |           | 10,822  |           |   | 13,061  |  |   | 12,256  |  |   | 12,230  | 
|Other liabilities **                                                                |  |               | 88,800  |            |   | 52,563    |  |           | 49,680  |           |   | 50,611     |  |           | 47,284  |           |   | 48,927  |  |   | 59,024  |  |   | 45,296  | 
|                                                                                    |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|Total liabilities                                                                   |  |               | 686,931 |            |   | 639,662   |  |           | 631,946 |           |   | 618,345    |  |           | 612,833 |           |   | 609,882 |  |   | 614,349 |  |   | 595,119 | 
|Total shareholders equity                                                          |  |               | 182,653 |            |   | 192,052   |  |           | 189,967 |           |   | 176,352    |  |           | 181,083 |           |   | 187,483 |  |   | 187,774 |  |   | 194,411 | 
|                                                                                    |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|Total liabilities and shareholders
equity                                          |  | $             | 869,584 |            | $ | 831,714   |  | $         | 821,913 |           | $ | 794,697    |  | $         | 793,916 |           | $ | 797,365 |  | $ | 802,123 |  | $ | 789,530 | 
|                                                                                    |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|                                                                                    |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|Book value per share:                                                               |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|Basic                                                                               |  | $             | 8.22    |            | $ | 8.65      |  | $         | 8.55    |           | $ | 7.94       |  | $         | 8.16    |           | $ | 8.47    |  | $ | 8.49    |  | $ | 8.81    | 
|Diluted                                                                             |  | $             | 8.22    |            | $ | 8.61      |  | $         | 8.55    |           | $ | 7.93       |  | $         | 8.16    |           | $ | 8.47    |  | $ | 8.49    |  | $ | 8.80    | 
|                                                                                    |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|Book value per share: (excluding unrealized capital gains (losses),
  net of taxes) |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|Basic                                                                               |  | $             | 8.52    |            | $ | 8.96      |  | $         | 8.90    |           | $ | 8.80       |  | $         | 8.74    |           | $ | 8.70    |  | $ | 8.63    |  | $ | 8.59    | 
|Diluted                                                                             |  | $             | 8.52    |            | $ | 8.93      |  | $         | 8.90    |           | $ | 8.78       |  | $         | 8.74    |           | $ | 8.70    |  | $ | 8.63    |  | $ | 8.57    | 
|                                                                                    |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|Ending shares outstanding:                                                          |  |               |         |            |   |           |  |           |         |           |   |            |  |           |         |           |   |         |  |   |         |  |   |         | 
|Basic                                                                               |  |               | 22,214  |            |   | 22,212    |  |           | 22,209  |           |   | 22,207     |  |           | 22,201  |           |   | 22,126  |  |   | 22,106  |  |   | 22,072  | 
|Diluted ***                                                                         |  |               | 22,214  |            |   | 22,299    |  |           | 22,209  |           |   | 22,241     |  |           | 22,203  |           |   | 22,131  |  |   | 22,106  |  |   | 22,105  | 

|    |                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------
|*   | Other assets include
  reinsurance balances recoverable, real estate and equipment, federal income
  tax recoverable and other assets.
|   
|**  | Other liabilities include
  accounts payable and accrued expenses, outstanding bank debt, and other
  miscellaneous liabilities.      
|   
|*** | Diluted shares were
  calculated using the treasury stock method.                                                                     

18

---



KMG
America Corporation 
Quarterly Financial Supplement 
First Quarter 2007

REPORTED SEGMENT QUARTERLY RESULTS - (Unaudited)(in thousands, except percentages)

|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|----------------------------------------- |  | --------------- | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|Worksite insurance business:              |  | Quarter
  Ended |        
|                                          |  |                 |        
|                                          |  | 3/31/2007       |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|Insurance
  premiums, net of reinsurance  |  | $               | 29,194  |            | $ | 22,260    |   | $         | 23,703  |           | $ | 19,326     |   | $         | 18,507  |           | $ | 15,736  |   | $ | 15,106  |   | $ | 15,028  |  
|Net investment
  income                   |  |                 | 2,051   |            |   | 1,954     |   |           | 1,868   |           |   | 1,764      |   |           | 1,595   |           |   | 1,602   |   |   | 1,537   |   |   | 1,603   |  
|Commissions and
  fee income              |  |                 |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Other income                              |  |                 | 161     |            |   | 259       |   |           | 41      |           |   | 50         |   |           | 46      |           |   | 42      |   |   | 40      |   |   | 41      |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total revenues                            |  |                 | 31,406  |            |   | 24,473    |   |           | 25,612  |           |   | 21,140     |   |           | 20,148  |           |   | 17,380  |   |   | 16,683  |   |   | 16,672  |  
|Policyholder
  benefits                   |  |                 | 27,513  |            |   | 17,607    |   |           | 17,044  |           |   | 7,405      |   |           | 13,595  |           |   | 10,504  |   |   | 11,501  |   |   | 10,661  |  
|Insurance
  commissions, net of deferrals |  |                 | 2,683   |            |   | 2,216     |   |           | 1,902   |           |   | 1,563      |   |           | 1,521   |           |   | 1,015   |   |   | 848     |   |   | 801     |  
|Expenses, taxes,
  fees and depreciation  |  |                 | 4,801   |            |   | 4,668     |   |           | 4,282   |           |   | 4,461      |   |           | 4,223   |           |   | 4,531   |   |   | 4,044   |   |   | 4,197   |  
|Amortization of
  DAC and VOBA (2)        |  |                 | 1,615   |            |   | 270       |   |           | 1,139   |           |   | 526        |   |           | 778     |           |   | 831     |   |   | 1,113   |   |   | 894     |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total benefits
  and expenses             |  |                 | 36,612  |            |   | 24,761    |   |           | 24,367  |           |   | 13,955     |   |           | 20,117  |           |   | 16,881  |   |   | 17,506  |   |   | 16,553  |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Income (loss)
  before income taxes       |  | $               | (5,206  | )          | $ | (288      | ) | $         | 1,245   |           | $ | 7,185      |   | $         | 31      |           | $ | 499     |   | $ | (823    | ) | $ | 119     |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                         
|Benefit ratio (3)                         |  |                 | 94.2    | %          |   | 79.1      | % |           | 71.9    | %         |   | 38.3       | % |           | 73.5    | %         |   | 66.8    | % |   | 76.1    | % |   | 70.9    | %
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                         
|Segment assets                            |  | $               | 179,721 |            | $ | 170,761   |   | $         | 167,949 |           | $ | 163,926    |   | $         | 168,693 |           | $ | 166,402 |   | $ | 167,107 |   | $ | 167,166 |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|----------------------------------------- |  | --------------- | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|                                          |  | Quarter
  Ended |        
|                                          |  |                 |        
|Senior
  market insurance business:       |  | 3/31/2007       |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Insurance
  premiums, net of reinsurance  |  | $               | 10,778  |            | $ | 10,205    |   | $         | 9,901   |           | $ | 10,705     |   | $         | 10,675  |           | $ | 10,135  |   | $ | 10,376  |   | $ | 11,128  |  
|Net investment
  income                   |  |                 | 2,704   |            |   | 2,524     |   |           | 2,368   |           |   | 1,566      |   |           | 1,411   |           |   | 1,297   |   |   | 1,195   |   |   | 1,137   |  
|Commissions and
  fee income              |  |                 |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Other income                              |  |                 | 780     |            |   | 786       |   |           | 826     |           |   | 760        |   |           | 809     |           |   | 747     |   |   | 732     |   |   | 799     |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total revenues                            |  |                 | 14,262  |            |   | 13,515    |   |           | 13,095  |           |   | 13,031     |   |           | 12,895  |           |   | 12,179  |   |   | 12,303  |   |   | 13,064  |  
|Policyholder
  benefits                   |  |                 | 7,752   |            |   | 6,007     |   |           | 7,432   |           |   | 46,763     |   |           | 8,535   |           |   | 8,989   |   |   | 8,845   |   |   | 9,176   |  
|Insurance
  commissions, net of deferrals |  |                 | 1,380   |            |   | 1,267     |   |           | 1,253   |           |   | 1,269      |   |           | 1,367   |           |   | 1,240   |   |   | 1,294   |   |   | 1,472   |  
|Expenses, taxes,
  fees and depreciation  |  |                 | 731     |            |   | 744       |   |           | 715     |           |   | 734        |   |           | 765     |           |   | 770     |   |   | 1,098   |   |   | 988     |  
|Amortization of
  DAC and VOBA (2)        |  |                 | 327     |            |   | (37       | ) |           | 648     |           |   | 504        |   |           | 472     |           |   | 150     |   |   | (392    | ) |   | 425     |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total benefits
  and expenses             |  |                 | 10,190  |            |   | 7,981     |   |           | 10,048  |           |   | 49,270     |   |           | 11,139  |           |   | 11,149  |   |   | 10,845  |   |   | 12,061  |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Income before
  income taxes              |  | $               | 4,072   |            | $ | 5,534     |   | $         | 3,047   |           | $ | (36,239    | ) | $         | 1,756   |           | $ | 1,030   |   | $ | 1,458   |   | $ | 1,003   |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                         
|Benefit ratio (3)                         |  |                 | 71.9    | %          |   | 58.9      | % |           | 75.1    | %         |   | 436.8      | % |           | 80.0    | %         |   | 88.7    | % |   | 85.2    | % |   | 82.5    | %
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                         
|Segment assets                            |  | $               | 264,624 |            | $ | 259,132   |   | $         | 255,013 |           | $ | 249,677    |   | $         | 201,603 |           | $ | 193,889 |   | $ | 185,675 |   | $ | 177,147 |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

Refer to page 27 for footnote
descriptions

19

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

|                                                            
|------------------------------------------------------------
|REPORTED SEGMENT QUARTERLY RESULTS - (Unaudited) (Continued)
|(in thousands, except percentages)                          

|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|----------------------------------------- |  | ------------- | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|                                          |  | Quarter Ended |        
|                                          |  |               |        
|Acquired business:                        |  | 3/31/2007     |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|                                          |  |               |        
|Insurance premiums, net of
  reinsurance  |  | $             | (57     | )          | $ | 796       |   | $         | 631     |           | $ | 631        |   | $         | 629     |           | $ | 1,579   |   | $ | 941     |   | $ | 661     |  
|Net investment income                     |  |               | 2,010   |            |   | 1,990     |   |           | 1,979   |           |   | 2,106      |   |           | 1,981   |           |   | 1,964   |   |   | 1,866   |   |   | 1,915   |  
|Commissions and fee income                |  |               |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Other income                              |  |               | 16      |            |   | 16        |   |           | 16      |           |   | 23         |   |           | 16      |           |   | 18      |   |   | 20      |   |   | 18      |  
|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|Total revenues                            |  |               | 1,969   |            |   | 2,802     |   |           | 2,626   |           |   | 2,760      |   |           | 2,626   |           |   | 3,561   |   |   | 2,827   |   |   | 2,594   |  
|Policyholder benefits                     |  |               | 2,277   |            |   | 2,315     |   |           | 1,709   |           |   | (29,793    | ) |           | 1,223   |           |   | 1,829   |   |   | 1,543   |   |   | 809     |  
|Insurance commissions, net of
  deferrals |  |               | 89      |            |   | 90        |   |           | 91      |           |   | 91         |   |           | 94      |           |   | 99      |   |   | 98      |   |   | 103     |  
|Expenses, taxes, fees and
  depreciation  |  |               | 596     |            |   | 724       |   |           | 595     |           |   | 593        |   |           | 608     |           |   | 695     |   |   | 675     |   |   | 667     |  
|Amortization of DAC and VOBA
  (2)        |  |               | 140     |            |   | (141      | ) |           | (106    | )         |   | 125        |   |           | (72     | )         |   | (276    | ) |   | (258    | ) |   | (105    | )
|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|Total benefits and expenses               |  |               | 3,102   |            |   | 2,988     |   |           | 2,289   |           |   | (28,984    | ) |           | 1,853   |           |   | 2,347   |   |   | 2,058   |   |   | 1,474   |  
|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|Income (loss) before income
  taxes       |  | $             | (1,133  | )          | $ | (186      | ) | $         | 337     |           | $ | 31,744     |   | $         | 773     |           | $ | 1,214   |   | $ | 769     |   | $ | 1,120   |  
|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                         
|Benefit ratio (3)                         |  |               | -3994.7 | %          |   | 290.8     | % |           | 270.8   | %         |   | -4721.6    | % |           | 194.4   | %         |   | 115.8   | % |   | 164.0   | % |   | 122.4   | %
|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                         
|Segment assets                            |  | $             | 159,761 |            | $ | 161,089   |   | $         | 163,274 |           | $ | 164,917    |   | $         | 201,880 |           | $ | 204,288 |   | $ | 207,229 |   | $ | 209,620 |  
|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

|                                          |  |               |       |            |   |           |   |           |       |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|----------------------------------------- |  | ------------- | ----- | ---------- | - | --------- | - | --------- | ----- | --------- | - | ---------- | - | --------- | ------ | --------- | - | ------ | - | - | ------ | - | - | ----- | -
|                                          |  | Quarter Ended |      
|                                          |  |               |      
|Third party administration business:      |  | 3/31/2007     |       | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |       | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |        | 6/30/2005 |  
|                                          |  |               |       |            |   |           |   |           |       |           |   |            |   |           |        |           |  
|                                          |  |               |      
|Insurance premiums, net of
  reinsurance  |  | $             |      |            | $ |          |   | $         |      |           | $ |           |   | $         |       |           | $ |       |   | $ |       |   | $ |      |  
|Net investment income                     |  |               |      |            |   |          |   |           |      |           |   |           |   |           |       |           |   |       |   |   |       |   |   |      |  
|Commissions and fee income                |  |               | 4,119 |            |   | 4,044     |   |           | 3,924 |           |   | 4,025      |   |           | 4,134  |           |   | 3,502  |   |   | 3,696  |   |   | 3,583 |  
|Other income                              |  |               |      |            |   |          |   |           |      |           |   |           |   |           |       |           |   |       |   |   |       |   |   |      |  
|                                          |  |               |       |            |   |           |   |           |       |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|Total revenues                            |  |               | 4,119 |            |   | 4,044     |   |           | 3,924 |           |   | 4,025      |   |           | 4,134  |           |   | 3,502  |   |   | 3,696  |   |   | 3,583 |  
|Policyholder benefits                     |  |               |      |            |   |          |   |           |      |           |   |           |   |           |       |           |   |       |   |   |       |   |   |      |  
|Insurance commissions, net of
  deferrals |  |               |      |            |   |          |   |           |      |           |   |           |   |           |       |           |   |       |   |   |       |   |   |      |  
|Expenses, taxes, fees and
  depreciation  |  |               | 3,622 |            |   | 3,568     |   |           | 3,530 |           |   | 3,448      |   |           | 3,503  |           |   | 3,240  |   |   | 3,131  |   |   | 3,261 |  
|Amortization of DAC and VOBA
  (2)        |  |               |      |            |   |          |   |           |      |           |   |           |   |           |       |           |   |       |   |   |       |   |   |      |  
|                                          |  |               |       |            |   |           |   |           |       |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|Total benefits and expenses               |  |               | 3,622 |            |   | 3,568     |   |           | 3,530 |           |   | 3,448      |   |           | 3,503  |           |   | 3,240  |   |   | 3,131  |   |   | 3,261 |  
|                                          |  |               |       |            |   |           |   |           |       |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|Income before income taxes                |  | $             | 497   |            | $ | 476       |   | $         | 394   |           | $ | 577        |   | $         | 631    |           | $ | 262    |   | $ | 565    |   | $ | 322   |  
|                                          |  |               |       |            |   |           |   |           |       |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|                                         
|Profit margin (7)                         |  |               | 12.1  | %          |   | 11.8      | % |           | 10.0  | %         |   | 14.3       | % |           | 15.3   | %         |   | 7.5    | % |   | 15.3   | % |   | 9.0   | %
|                                          |  |               |       |            |   |           |   |           |       |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|                                         
|Segment assets                            |  | $             | 8,549 |            | $ | 9,756     |   | $         | 6,689 |           | $ | 10,142     |   | $         | 10,063 |           | $ | 11,103 |   | $ | 10,327 |   | $ | 8,304 |  
|                                          |  |               |       |            |   |           |   |           |       |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  

Refer to page 27 for footnote descriptions

20

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

|                                                            
|------------------------------------------------------------
|REPORTED SEGMENT QUARTERLY RESULTS - (Unaudited) (Continued)
|(in
  thousands, except percentages)                        

|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |  |   |         |  
|----------------------------------------- |  | ------------- | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- |  | - | ------- | -
|                                          |  | Quarter Ended |        
|                                          |  |               |        
|Corporate and other                       |  | 3/31/2007     |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|                                          |  |               |        
|Insurance premiums, net of
  reinsurance  |  | $             |        |            | $ |          |   | $         |        |           | $ |           |   | $         |        |           | $ |        |   | $ |        |  | $ |        |  
|Net investment income                     |  |               | 1,111   |            |   | 1,200     |   |           | 1,237   |           |   | 2,184      |   |           | 2,219   |           |   | 2,340   |   |   | 2,490   |  |   | 2,145   |  
|Commissions and fee income                |  |               | 49      |            |   | 107       |   |           | 94      |           |   | 92         |   |           | 85      |           |   | 50      |   |   | 78      |  |   | 88      |  
|Realized gains (losses)                   |  |               | (53     | )          |   | 1,115     |   |           | 7       |           |   | (115       | ) |           | 211     |           |   | 34      |   |   | 278     |  |   | 19      |  
|Gain on unextinguished debt               |  |               |        |            |   | 1,021     |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |  |   |        |  
|Other income                              |  |               | 102     |            |   | 208       |   |           | 391     |           |   | 90         |   |           | 115     |           |   | 89      |   |   | 407     |  |   | 121     |  
|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |  |   |         |  
|Total revenues                            |  |               | 1,209   |            |   | 3,651     |   |           | 1,729   |           |   | 2,251      |   |           | 2,630   |           |   | 2,513   |   |   | 3,253   |  |   | 2,373   |  
|Policyholder benefits                     |  |               |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |  |   |        |  
|Insurance commissions, net of
  deferrals |  |               |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |  |   |        |  
|Expenses, taxes, fees and
  depreciation  |  |               | 4,739   |            |   | 4,646     |   |           | 3,638   |           |   | 3,977      |   |           | 3,949   |           |   | 3,406   |   |   | 3,251   |  |   | 3,992   |  
|Amortization of DAC and VOBA
  (2)        |  |               |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |  |   |        |  
|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |  |   |         |  
|Total benefits and expenses               |  |               | 4,739   |            |   | 4,646     |   |           | 3,638   |           |   | 3,977      |   |           | 3,949   |           |   | 3,406   |   |   | 3,251   |  |   | 3,992   |  
|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |  |   |         |  
|Income (loss) before income
  taxes       |  | $             | (3,530  | )          | $ | (995      | ) | $         | (1,909  | )         | $ | (1,726     | ) | $         | (1,319  | )         | $ | (893    | ) | $ | 2       |  | $ | (1,619  | )
|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |  |   |         |  
|Segment assets                            |  | $             | 256,929 |            | $ | 230,975   |   | $         | 228,987 |           | $ | 206,034    |   | $         | 211,677 |           | $ | 221,683 |   | $ | 231,785 |  | $ | 227,294 |  
|                                          |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |  |   |         |  

Refer to page 27 for footnote descriptions

21

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

|                                                   
|---------------------------------------------------
|REPORTED SEGMENT YEAR-TO-DATE RESULTS - (Unaudited)
|(in thousands, except percentages)                 

|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|----------------------------------------- |  | ------------ | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|                                          |  | Year-to-Date |        
|                                          |  |              |        
|Worksite insurance
  business:            |  | 3/31/2007    |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|                                          |  |              |        
|Insurance premiums, net of
  reinsurance  |  | $            | 29,194  |            | $ | 83,796    |   | $         | 61,536  |           | $ | 37,833     |   | $         | 18,507  |           | $ | 60,528  |   | $ | 44,792  |   | $ | 29,686  |  
|Net investment income                     |  |              | 2,051   |            |   | 7,181     |   |           | 5,227   |           |   | 3,359      |   |           | 1,595   |           |   | 6,524   |   |   | 4,922   |   |   | 3,385   |  
|Commissions and fee income                |  |              |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Other income                              |  |              | 161     |            |   | 396       |   |           | 137     |           |   | 96         |   |           | 46      |           |   | 172     |   |   | 130     |   |   | 90      |  
|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|Total revenues                            |  |              | 31,406  |            |   | 91,373    |   |           | 66,900  |           |   | 41,288     |   |           | 20,148  |           |   | 67,224  |   |   | 49,844  |   |   | 33,161  |  
|Policyholder benefits                     |  |              | 27,513  |            |   | 55,651    |   |           | 38,044  |           |   | 21,000     |   |           | 13,595  |           |   | 43,556  |   |   | 33,052  |   |   | 21,551  |  
|Insurance commissions, net of
  deferrals |  |              | 2,683   |            |   | 7,202     |   |           | 4,986   |           |   | 3,084      |   |           | 1,521   |           |   | 3,742   |   |   | 2,727   |   |   | 1,879   |  
|Expenses, taxes, fees and
  depreciation  |  |              | 4,801   |            |   | 17,634    |   |           | 12,966  |           |   | 8,684      |   |           | 4,223   |           |   | 16,327  |   |   | 11,796  |   |   | 7,752   |  
|Amortization of DAC and VOBA
  (2)        |  |              | 1,615   |            |   | 2,713     |   |           | 2,443   |           |   | 1,304      |   |           | 778     |           |   | 3,658   |   |   | 2,827   |   |   | 1,714   |  
|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total benefits and expenses               |  |              | 36,612  |            |   | 83,200    |   |           | 58,439  |           |   | 34,072     |   |           | 20,117  |           |   | 67,283  |   |   | 50,402  |   |   | 32,896  |  
|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Income (loss) before income
  taxes       |  | $            | (5,206  | )          | $ | 8,173     |   | $         | 8,461   |           | $ | 7,216      |   | $         | 31      |           | $ | (59     | ) | $ | (558    | ) | $ | 265     |  
|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                          |  |              |        
|Benefit ratio (3)                         |  |              | 94.2    | %          |   | 66.4      | % |           | 61.8    | %         |   | 55.5       | % |           | 73.5    | %         |   | 72.0    | % |   | 73.8    | % |   | 72.6    | %
|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                         
|Segment assets                            |  | $            | 179,721 |            | $ | 170,761   |   | $         | 167,949 |           | $ | 163,926    |   | $         | 168,693 |           | $ | 166,402 |   | $ | 167,107 |   | $ | 167,166 |  
|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|----------------------------------------- |  | ------------ | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|                                          |  | Year-to-Date |        
|                                          |  |              |        
|Senior market insurance
  business:       |  | 3/31/2007    |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|                                          |  |              |        
|Insurance premiums, net of
  reinsurance  |  | $            | 10,778  |            | $ | 41,486    |   | $         | 31,281  |           | $ | 21,380     |   | $         | 10,675  |           | $ | 42,240  |   | $ | 32,105  |   | $ | 21,729  |  
|Net investment income                     |  |              | 2,704   |            |   | 7,869     |   |           | 5,345   |           |   | 2,977      |   |           | 1,411   |           |   | 4,641   |   |   | 3,344   |   |   | 2,149   |  
|Commissions and fee income                |  |              |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Other income                              |  |              | 780     |            |   | 3,181     |   |           | 2,395   |           |   | 1,569      |   |           | 809     |           |   | 2,935   |   |   | 2,188   |   |   | 1,456   |  
|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total revenues                            |  |              | 14,262  |            |   | 52,536    |   |           | 39,021  |           |   | 25,926     |   |           | 12,895  |           |   | 49,816  |   |   | 37,637  |   |   | 25,334  |  
|Policyholder benefits                     |  |              | 7,752   |            |   | 68,737    |   |           | 62,730  |           |   | 55,298     |   |           | 8,535   |           |   | 35,355  |   |   | 26,366  |   |   | 17,521  |  
|Insurance commissions, net of
  deferrals |  |              | 1,380   |            |   | 5,156     |   |           | 3,889   |           |   | 2,636      |   |           | 1,367   |           |   | 5,495   |   |   | 4,255   |   |   | 2,961   |  
|Expenses, taxes, fees and
  depreciation  |  |              | 731     |            |   | 2,958     |   |           | 2,214   |           |   | 1,499      |   |           | 765     |           |   | 3,995   |   |   | 3,225   |   |   | 2,127   |  
|Amortization of DAC and VOBA
  (2)        |  |              | 327     |            |   | 1,587     |   |           | 1,624   |           |   | 976        |   |           | 472     |           |   | 554     |   |   | 404     |   |   | 796     |  
|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total benefits and expenses               |  |              | 10,190  |            |   | 78,438    |   |           | 70,457  |           |   | 60,409     |   |           | 11,139  |           |   | 45,399  |   |   | 34,250  |   |   | 23,405  |  
|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Income (loss) before income
  taxes       |  | $            | 4,072   |            | $ | (25,902   | ) | $         | (31,436 | )         | $ | (34,483    | ) | $         | 1,756   |           | $ | 4,417   |   | $ | 3,387   |   | $ | 1,929   |  
|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                         
|Benefit ratio (3)                         |  |              | 71.9    | %          |   | 165.7     | % |           | 200.5   | %         |   | 258.6      | % |           | 80.0    | %         |   | 83.7    | % |   | 82.1    | % |   | 80.6    | %
|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                         
|Segment assets                            |  | $            | 264,624 |            | $ | 259,132   |   | $         | 255,013 |           | $ | 249,677    |   | $         | 201,603 |           | $ | 193,889 |   | $ | 185,675 |   | $ | 177,147 |  
|                                          |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

Refer to page 27 for footnote descriptions

22

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

REPORTED SEGMENT YEAR-TO-DATE
RESULTS - (Unaudited) (Continued)(in thousands, except percentages)

|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|--------------------------------------- |  | ------------ | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|                                        |  | Year-to-Date |        
|                                        |  |             
|Acquired business:                      |  | 3/31/2007    |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Insurance premiums, net of reinsurance  |  | $            | (57     | )          | $ | 2,687     |   | $         | 1,891   |           | $ | 1,260      |   | $         | 629     |           | $ | 4,119   |   | $ | 2,540   |   | $ | 1,599   |  
|Net investment income                   |  |              | 2,010   |            |   | 8,056     |   |           | 6,066   |           |   | 4,087      |   |           | 1,981   |           |   | 7,808   |   |   | 5,844   |   |   | 3,978   |  
|Commissions and fee income              |  |              |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Other income                            |  |              | 16      |            |   | 71        |   |           | 55      |           |   | 39         |   |           | 16      |           |   | 69      |   |   | 51      |   |   | 31      |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total revenues                          |  |              | 1,969   |            |   | 10,814    |   |           | 8,012   |           |   | 5,386      |   |           | 2,626   |           |   | 11,996  |   |   | 8,435   |   |   | 5,608   |  
|Policyholder benefits                   |  |              | 2,277   |            |   | (24,546   | ) |           | (26,861 | )         |   | (28,570    | ) |           | 1,223   |           |   | 5,376   |   |   | 3,547   |   |   | 2,004   |  
|Insurance commissions, net of deferrals |  |              | 89      |            |   | 366       |   |           | 276     |           |   | 185        |   |           | 94      |           |   | 399     |   |   | 300     |   |   | 202     |  
|Expenses, taxes, fees and depreciation  |  |              | 596     |            |   | 2,520     |   |           | 1,796   |           |   | 1,201      |   |           | 608     |           |   | 2,741   |   |   | 2,046   |   |   | 1,371   |  
|Amortization of DAC and VOBA (2)        |  |              | 140     |            |   | (194      | ) |           | (53     | )         |   | 53         |   |           | (72     | )         |   | (744    | ) |   | (468    | ) |   | (210    | )
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total benefits and expenses             |  |              | 3,102   |            |   | (21,854   | ) |           | (24,842 | )         |   | (27,131    | ) |           | 1,853   |           |   | 7,772   |   |   | 5,425   |   |   | 3,367   |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Income (loss) before income taxes       |  | $            | (1,133  | )          | $ | 32,668    |   | $         | 32,854  |           | $ | 32,517     |   | $         | 773     |           | $ | 4,224   |   | $ | 3,010   |   | $ | 2,241   |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Benefit ratio (3)                       |  |              | -3994.7 | %          |   | -913.5    | % |           | -1420.5 | %         |   | -2267.5    | % |           | 194.4   | %         |   | 130.5   | % |   | 139.6   | % |   | 125.3   | %
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Segment assets                          |  | $            | 159,761 |            | $ | 161,089   |   | $         | 163,274 |           | $ | 164,917    |   | $         | 201,880 |           | $ | 204,288 |   | $ | 207,229 |   | $ | 209,620 |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

|                                        |  |              |       |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|--------------------------------------- |  | ------------ | ----- | ---------- | - | --------- | - | --------- | ------ | --------- | - | ---------- | - | --------- | ------ | --------- | - | ------ | - | - | ------ | - | - | ----- | -
|                                        |  | Year-to-Date |      
|                                        |  |             
|Third party administration business:    |  | 3/31/2007    |       | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |        | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |        | 6/30/2005 |  
|                                        |  |              |       |            |   |           |   |           |        |           |   |            |   |           |        |           |  
|                                        |  |              |       |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|Insurance premiums, net of reinsurance  |  | $            |      |            | $ |          |   | $         |       |           | $ |           |   | $         |       |           | $ |       |   | $ |       |   | $ |      |  
|Net investment income                   |  |              |      |            |   |          |   |           |       |           |   |           |   |           |       |           |   |       |   |   |       |   |   |      |  
|Commissions and fee income              |  |              | 4,119 |            |   | 16,127    |   |           | 12,083 |           |   | 8,159      |   |           | 4,134  |           |   | 14,264 |   |   | 10,762 |   |   | 7,066 |  
|Other income                            |  |              |      |            |   |          |   |           |       |           |   |           |   |           |       |           |   |       |   |   |       |   |   |      |  
|                                        |  |              |       |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|Total revenues                          |  |              | 4,119 |            |   | 16,127    |   |           | 12,083 |           |   | 8,159      |   |           | 4,134  |           |   | 14,264 |   |   | 10,762 |   |   | 7,066 |  
|Policyholder benefits                   |  |              |      |            |   |          |   |           |       |           |   |           |   |           |       |           |   |       |   |   |       |   |   |      |  
|Insurance commissions, net of deferrals |  |              |      |            |   |          |   |           |       |           |   |           |   |           |       |           |   |       |   |   |       |   |   |      |  
|Expenses, taxes, fees and depreciation  |  |              | 3,622 |            |   | 14,049    |   |           | 10,481 |           |   | 6,951      |   |           | 3,503  |           |   | 12,838 |   |   | 9,598  |   |   | 6,467 |  
|Amortization of DAC and VOBA (2)        |  |              |      |            |   |          |   |           |       |           |   |           |   |           |       |           |   |       |   |   |       |   |   |      |  
|                                        |  |              |       |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|Total benefits and expenses             |  |              | 3,622 |            |   | 14,049    |   |           | 10,481 |           |   | 6,951      |   |           | 3,503  |           |   | 12,838 |   |   | 9,598  |   |   | 6,467 |  
|                                        |  |              |       |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|Income before income taxes              |  | $            | 497   |            | $ | 2,078     |   | $         | 1,602  |           | $ | 1,208      |   | $         | 631    |           | $ | 1,426  |   | $ | 1,164  |   | $ | 599   |  
|                                        |  |              |       |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|                                        |  |              |       |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|Profit margin (6)                       |  |              | 12.1  | %          |   | 12.9      | % |           | 13.3   | %         |   | 14.8       | % |           | 15.3   | %         |   | 10.0   | % |   | 10.8   | % |   | 8.5   | %
|                                        |  |              |       |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|                                        |  |              |       |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  
|Segment assets                          |  | $            | 8,549 |            | $ | 9,756     |   | $         | 6,689  |           | $ | 10,142     |   | $         | 10,063 |           | $ | 11,103 |   | $ | 10,327 |   | $ | 8,304 |  
|                                        |  |              |       |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |       |  

Refer to page 27 for footnote descriptions

23

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

REPORTED SEGMENT YEAR-TO-DATE RESULTS - (Unaudited) (Continued)(in thousands, except percentages)

|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|--------------------------------------- |  | ------------ | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|                                        |  | Year-to-Date |        
|                                        |  |             
|Corporate
  and other                   |  | 3/31/2007    |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Insurance premiums, net of reinsurance  |  | $            |        |            | $ |          |   | $         |        |           | $ |           |   | $         |        |           | $ |        |   | $ |        |   | $ |        |  
|Net investment income                   |  |              | 1,111   |            |   | 6,840     |   |           | 5,640   |           |   | 4,403      |   |           | 2,219   |           |   | 8,772   |   |   | 6,432   |   |   | 3,942   |  
|Commissions and fee income              |  |              | 49      |            |   | 378       |   |           | 271     |           |   | 177        |   |           | 85      |           |   | 301     |   |   | 251     |   |   | 173     |  
|Realized gains (losses)                 |  |              | (53     | )          |   | 1,218     |   |           | 103     |           |   | 96         |   |           | 211     |           |   | 358     |   |   | 324     |   |   | 46      |  
|Gain on extinguishment of debt          |  |              |        |            |   | 1,021     |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Other income                            |  |              | 102     |            |   | 804       |   |           | 596     |           |   | 205        |   |           | 115     |           |   | 688     |   |   | 599     |   |   | 192     |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total revenues                          |  |              | 1,209   |            |   | 10,261    |   |           | 6,610   |           |   | 4,881      |   |           | 2,630   |           |   | 10,119  |   |   | 7,606   |   |   | 4,353   |  
|Policyholder benefits                   |  |              |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Insurance commissions, net of deferrals |  |              |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Expenses, taxes, fees and depreciation  |  |              | 4,739   |            |   | 16,210    |   |           | 11,564  |           |   | 7,926      |   |           | 3,949   |           |   | 13,519  |   |   | 10,113  |   |   | 6,862   |  
|Amortization of DAC and VOBA (2)        |  |              |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total benefits and expenses             |  |              | 4,739   |            |   | 16,210    |   |           | 11,564  |           |   | 7,926      |   |           | 3,949   |           |   | 13,519  |   |   | 10,113  |   |   | 6,862   |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Income (loss) before income taxes       |  | $            | (3,530  | )          | $ | (5,949    | ) | $         | (4,954  | )         | $ | (3,045     | ) | $         | (1,319  | )         | $ | (3,400  | ) | $ | (2,507  | ) | $ | (2,509  | )
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Segment assets                          |  | $            | 256,929 |            | $ | 230,975   |   | $         | 228,987 |           | $ | 206,034    |   | $         | 211,677 |           | $ | 221,683 |   | $ | 231,785 |   | $ | 227,294 |  
|                                        |  |              |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

Refer to page 27 for footnote descriptions

24

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

SALES - ISSUED NEW ANNUALIZED PREMIUMS
(Unaudited)
(in thousands)

|                                                     |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |       |  |   |       |  |   |       | 
|---------------------------------------------------- |  | ------------- | ------ | ---------- | - | --------- |  | --------- | ------ | --------- | - | ---------- |  | --------- | ------ | --------- | - | ----- |  | - | ----- |  | - | ----- | 
|                                                     |  | Quarter Ended |       
|                                                     |  |              
|                                                     |  | 3/31/2007     |        | 12/31/2006 |   | 9/30/2006 |  | 6/30/2006 |        | 3/31/2006 |   | 12/31/2005 |  | 9/30/2005 |        | 6/30/2005 |  
|                                                     |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |  
|                                                     |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |       |  |   |       |  |   |       | 
|Worksite insurance segment - Kanawha Legacy          |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |  
|Life                                                 |  | $             | 834    |            | $ | 1,088     |  | $         | 448    |           | $ | 623        |  | $         | 402    |           | $ | 448   |  | $ | 709   |  | $ | 677   | 
|Cancer                                               |  |               | 466    |            |   | 487       |  |           | 360    |           |   | 441        |  |           | 486    |           |   | 504   |  |   | 542   |  |   | 430   | 
|Disability income                                    |  |               | 528    |            |   | 790       |  |           | 545    |           |   | 633        |  |           | 633    |           |   | 1,249 |  |   | 821   |  |   | 933   | 
|Other A&H                                            |  |               | 362    |            |   | 1,113     |  |           | 263    |           |   | 276        |  |           | 210    |           |   | 1,098 |  |   | 328   |  |   | 315   | 
|                                                     |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |       |  |   |       |  |   |       | 
|Total worksite - Kanawha
  Legacy                    |  |               | 2,190  |            |   | 3,478     |  |           | 1,616  |           |   | 1,973      |  |           | 1,731  |           |   | 3,299 |  |   | 2,400 |  |   | 2,355 | 
|                                                     |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |       |  |   |       |  |   |       | 
|Worksite insurance segment - New Large Case Activity |  |               |        |            |   |           |  |           |        |           |   |            |  |           |       
|                                                     |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |       |  |   |       |  |   |       | 
|Core
  Group Products:                               |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |       |  |   |       |  |   |       | 
|Life                                                 |  | $             | 1,726  |            | $ | 58        |  | $         | 339    |           | $ | 180        |  | $         | 1,151  |           | $ |      |  | $ |      |  | $ |      | 
|Stop loss                                            |  |               | 27,099 |            |   | 4,626     |  |           | 5,502  |           |   | 5,487      |  |           | 12,776 |           |   | 4,124 |  |   | 2,993 |  |   | 1,128 | 
|Disability income                                    |  |               | 1,353  |            |   | 3         |  |           | 269    |           |   | 40         |  |           | 149    |           |   |      |  |   |      |  |   |      | 
|Other A&H                                            |  |               |       |            |   |          |  |           |       |           |   |           |  |           |       |           |   |      |  |   |      |  |   |      | 
|Voluntary
  Benefit Products:                        |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |       |  |   |       |  |  
|Life *                                               |  |               | 338    |            |   | 2,026     |  |           | 5,519  |           |   | 935        |  |           | 122    |           |   | 167   |  |   | 219   |  |   | 9     | 
|Cancer                                               |  |               | 59     |            |   | 260       |  |           | 20     |           |   | 64         |  |           | 41     |           |   | 125   |  |   | 18    |  |   | 80    | 
|Disability income                                    |  |               | 821    |            |   | 899       |  |           | 695    |           |   | 1,165      |  |           | 1,278  |           |   | 1,331 |  |   | 836   |  |   | 591   | 
|Other A&H                                            |  |               | 237    |            |   | 516       |  |           | 443    |           |   | 365        |  |           | 336    |           |   | 244   |  |   | 299   |  |   | 1     | 
|                                                     |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |       |  |   |       |  |   |       | 
|Total worksite - New Large
  Case Activity           |  |               | 31,633 |            |   | 8,387     |  |           | 12,787 |           |   | 8,236      |  |           | 15,853 |           |   | 5,991 |  |   | 4,365 |  |   | 1,809 | 
|                                                     |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |       |  |   |       |  |   |       | 
|Other Kanawha legacy sales                           |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |       |  |   |       |  |   |       | 
|Long term care                                       |  |               | 43     |            |   | 45        |  |           | 60     |           |   | 52         |  |           | 303    |           |   | 260   |  |   | 360   |  |   | 549   | 
|                                                     |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |       |  |   |       |  |   |       | 
|                                                     |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |       |  |   |       |  |   |       | 
|Total sales                                          |  | $             | 33,866 |            | $ | 11,910    |  | $         | 14,463 |           | $ | 10,261     |  | $         | 17,887 |           | $ | 9,550 |  | $ | 7,125 |  | $ | 4,713 | 
|                                                     |  |               |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |       |  |   |       |  |   |       | 

* Life sales for the third
quarter 2006 include $5.3 million of annualized premium related to a
small block acquisition (primarily voluntary term life policies).

25

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

SALES - ISSUED NEW ANNUALIZED PREMIUMS (Unaudited)
($ in thousands)

|                                                       |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |        |  |   |        |  |   |       | 
|------------------------------------------------------ |  | ------------ | ------ | ---------- | - | --------- |  | --------- | ------ | --------- | - | ---------- |  | --------- | ------ | --------- | - | ------ |  | - | ------ |  | - | ----- | 
|                                                       |  | Year-to-Date |       
|                                                       |  |              |       
|                                                       |  | 3/31/2007    |        | 12/31/2006 |   | 9/30/2006 |  | 6/30/2006 |        | 3/31/2006 |   | 12/31/2005 |  | 9/30/2005 |        | 6/30/2005 |  
|                                                       |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |  
|                                                       |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |        |  |   |        |  |   |       | 
|Worksite insurance segment - Kanawha Legacy            |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |        |  |   |        | 
|Life                                                   |  | $            | 834    |            | $ | 2,561     |  | $         | 1,473  |           | $ | 1,025      |  | $         | 402    |           | $ | 2,453  |  | $ | 2,005  |  | $ | 1,296 | 
|Cancer                                                 |  |              | 466    |            |   | 1,774     |  |           | 1,287  |           |   | 927        |  |           | 486    |           |   | 1,984  |  |   | 1,480  |  |   | 938   | 
|Disability income                                      |  |              | 528    |            |   | 2,601     |  |           | 1,811  |           |   | 1,266      |  |           | 633    |           |   | 4,314  |  |   | 3,065  |  |   | 2,244 | 
|Other A&H                                              |  |              | 362    |            |   | 1,862     |  |           | 749    |           |   | 486        |  |           | 210    |           |   | 2,400  |  |   | 1,302  |  |   | 974   | 
|                                                       |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |        |  |   |        |  |   |       | 
|Total worksite - Kanawha Legacy                        |  |              | 2,190  |            |   | 8,798     |  |           | 5,320  |           |   | 3,704      |  |           | 1,731  |           |   | 11,151 |  |   | 7,852  |  |   | 5,452 | 
|                                                       |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |        |  |   |        |  |   |       | 
|Worksite
  insurance segment - New Large Case Activity
|                                                       |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |        |  |   |        |  |   |       | 
|Core Group Products:                                   |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |        |  |   |        |  |   |       | 
|Life                                                   |  | $            | 1,726  |            | $ | 1,728     |  | $         | 1,670  |           | $ | 1,331      |  | $         | 1,151  |           | $ |       |  | $ |       |  | $ |      | 
|Stop loss                                              |  |              | 27,099 |            |   | 28,391    |  |           | 23,765 |           |   | 18,263     |  |           | 12,776 |           |   | 8,245  |  |   | 4,121  |  |   | 1,128 | 
|Disability income                                      |  |              | 1,353  |            |   | 461       |  |           | 458    |           |   | 189        |  |           | 149    |           |   |       |  |   |       |  |   |      | 
|Other A&H                                              |  |              |       |            |   |          |  |           |       |           |   |           |  |           |       |           |   |       |  |   |       |  |   |      | 
|Voluntary Benefit Products:                            |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |        |  |   |        |  |   |       | 
|Life *                                                 |  |              | 338    |            |   | 8,602     |  |           | 6,576  |           |   | 1,057      |  |           | 122    |           |   | 395    |  |   | 228    |  |   | 9     | 
|Cancer                                                 |  |              | 59     |            |   | 385       |  |           | 125    |           |   | 105        |  |           | 41     |           |   | 223    |  |   | 98     |  |   | 80    | 
|Disability income                                      |  |              | 821    |            |   | 4,037     |  |           | 3,138  |           |   | 2,443      |  |           | 1,278  |           |   | 2,758  |  |   | 1,427  |  |   | 591   | 
|Other A&H                                              |  |              | 237    |            |   | 1,660     |  |           | 1,144  |           |   | 701        |  |           | 336    |           |   | 544    |  |   | 300    |  |   | 1     | 
|                                                       |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |        |  |   |        |  |   |       | 
|Total worksite - New Large Case
Activity               |  |              | 31,633 |            |   | 45,263    |  |           | 36,876 |           |   | 24,089     |  |           | 15,853 |           |   | 12,165 |  |   | 6,174  |  |   | 1,809 | 
|                                                       |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |        |  |   |        |  |   |       | 
|Other Kanawha legacy sales                             |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |        |  |   |        |  |   |       | 
|Long term care                                         |  |              | 43     |            |   | 460       |  |           | 415    |           |   | 355        |  |           | 303    |           |   | 1,616  |  |   | 1,356  |  |   | 996   | 
|                                                       |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |        |  |   |        |  |   |       | 
|                                                       |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |        |  |   |        |  |   |       | 
|Total sales                                            |  | $            | 33,866 |            | $ | 54,522    |  | $         | 42,611 |           | $ | 28,148     |  | $         | 17,887 |           | $ | 24,932 |  | $ | 15,382 |  | $ | 8,257 | 
|                                                       |  |              |        |            |   |           |  |           |        |           |   |            |  |           |        |           |   |        |  |   |        |  |   |       | 

* Life sales for the nine and twelve months year-to-date 2006 include $5.3 million of annualized premium related
 to a small block acquisition (primarily voluntary term life policies).

26

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

List of footnote references:

|    |                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Operating
  income is a non-GAAP measure, and is defined as net income excluding realized
  investment gains (losses), except for realized investment gains (losses) that
  are directly offset by executive deferred compensation expenses, net of
  taxes.
|    |                                                                                                                                                                                                                                                             
|(2) | DAC:
  deferred acquisition costs; VOBA: value of business acquired.                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                             
|(3) | Benefit
  ratio is defined as total policyholder benefits divided by total net
  premiums.                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                             
|(4) | Expense
  ratio is defined as commissions, expenses and amortization of DAC/VOBA (on an
  operating income basis) divided by earned premiums plus commissions/fees.                                                                                         
|    |                                                                                                                                                                                                                                                             
|(5) | Average
  portfolio yield is defined as net investment income divided by average
  invested assets, excluding the impact of unrealized gains (losses) plus
  average cash and equivalents.                                                                  
|    |                                                                                                                                                                                                                                                             
|(6) | Average
  cash/equivalents and short term assets include the portion of initial public
  offering proceeds that are invested in cash or fixed maturity securities
  maturing in less than two years.                                                        
|    |                                                                                                                                                                                                                                                             
|(7) | Profit
  margin is defined as pretax income divided by commissions/fees.                                                                                                                                                                                    

27

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

APPENDIX
 SEGMENT PRO FORMA RESULTS

Rationale
for pro forma segment analysis

To supplement the financial
statements presented on a GAAP basis, the Company has presented quarterly
segment results on a pro forma basis, which is a non-GAAP measure. The second
quarter 2006 reported segment results were impacted by the reallocation of
portions of policy reserves and corresponding investment income between the
Kanawha legacy reporting segments. When KMG America acquired Kanawha in December
of 2004, an additional provision for adverse deviations related to all legacy
business was added to policy reserves, and allocated primarily to the acquired
business segment and a smaller amount to the life products included in the
legacy portion of the worksite insurance business segment. Given the
discontinuation of long term care sales activity combined with the uncertainty
in the amount and timing in obtaining approvals for rate increases for long
term care policies from state insurance regulators, the company has deemed it
appropriate to reallocate much more of the initial provision for adverse
deviations to the senior segment. The triggering event for implementing this
reallocation of policy reserves as of June 30, 2006, was the implementation of the
final reserve methodology which replaced the preliminary reserve methodology
that had been in use since inception.

The result of the
reallocation of reserves between Kanawha legacy segments was to increase
reserves by $37.5 million in the senior segment, offset by reduced reserves of
$31.2 million in the acquired segment and $6.3 million in the legacy portion of
the worksite segment as of June 30, 2006. There was no impact to overall policy
reserves or to reported earnings to date.

This reallocation of
reserves between the Kanawha legacy segments distorts the second quarter 2006
reported policyholder benefits and the resulting reported benefit ratios by
segment. To provide a meaningful period-over-period comparison by reporting
segment, policy reserves and investment income contained in the segment results
over the prior quarters have been reclassified on a pro forma basis in the
attached financial tables and are also reflected in the subsequent discussion
of segment results above.

A reconciliation of the
non-GAAP pro forma adjustments is presented on pages 32-33.

28

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

PRO FORMA SEGMENT QUARTERLY OPERATING RESULTS
(Unaudited)(in thousands, except percentages)


|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|----------------------------------------- |  | --------------- | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|Worksite
  - Kanawha Legacy:              |  | Quarter
  Ended |        
|                                          |  |                
|                                          |  | 3/31/2007       |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|Insurance
  premiums, net of reinsurance  |  | $               | 13,345  |            | $ | 13,447    |   | $         | 13,869  |           | $ | 14,159     |   | $         | 13,972  |           | $ | 13,912  |   | $ | 14,097  |   | $ | 14,932  |  
|Net investment
  income                   |  |                 | 2,051   |            |   | 1,954     |   |           | 1,868   |           |   | 1,876      |   |           | 1,739   |           |   | 1,732   |   |   | 1,715   |   |   | 1,654   |  
|Commissions and
  fee income              |  |                 |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Other income                              |  |                 | 53      |            |   | 50        |   |           | 41      |           |   | 50         |   |           | 46      |           |   | 42      |   |   | 40      |   |   | 41      |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total revenues                            |  |                 | 15,449  |            |   | 15,451    |   |           | 15,778  |           |   | 16,085     |   |           | 15,757  |           |   | 15,686  |   |   | 15,852  |   |   | 16,627  |  
|Policyholder
  benefits                   |  |                 | 10,140  |            |   | 9,270     |   |           | 9,240   |           |   | 9,964      |   |           | 10,241  |           |   | 9,327   |   |   | 10,838  |   |   | 10,551  |  
|Insurance
  commissions, net of deferrals |  |                 | 1,043   |            |   | 953       |   |           | 949     |           |   | 854        |   |           | 882     |           |   | 833     |   |   | 745     |   |   | 787     |  
|Expenses, taxes,
  fees and depreciation  |  |                 | 2,361   |            |   | 2,269     |   |           | 2,113   |           |   | 2,323      |   |           | 2,271   |           |   | 2,539   |   |   | 2,414   |   |   | 2,503   |  
|Amortization of
  DAC and VOBA (2)        |  |                 | 1,014   |            |   | (21       | ) |           | 809     |           |   | 332        |   |           | 584     |           |   | 766     |   |   | 992     |   |   | 894     |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total benefits
  and expenses             |  |                 | 14,558  |            |   | 12,471    |   |           | 13,111  |           |   | 13,473     |   |           | 13,978  |           |   | 13,465  |   |   | 14,989  |   |   | 14,735  |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Income before
  income taxes              |  |                 | 891     |            |   | 2,980     |   |           | 2,667   |           |   | 2,612      |   |           | 1,779   |           |   | 2,221   |   |   | 863     |   |   | 1,892   |  
|(Provision) for
  income taxes            |  |                 | (312    | )          |   | (1,043    | ) |           | (933    | )         |   | (914       | ) |           | (623    | )         |   | (777    | ) |   | (302    | ) |   | (662    | )
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Operating income
  after tax              |  | $               | 579     |            | $ | 1,937     |   | $         | 1,734   |           | $ | 1,698      |   | $         | 1,156   |           | $ | 1,444   |   | $ | 561     |   | $ | 1,230   |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Benefit ratio (3)                         |  |                 | 76.0    | %          |   | 68.9      | % |           | 66.6    | %         |   | 70.4       | % |           | 73.3    | %         |   | 67.0    | % |   | 76.9    | % |   | 70.7    | %
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Segment assets                            |  | $               | 153,789 |            | $ | 155,017   |   | $         | 156,015 |           | $ | 156,794    |   | $         | 157,983 |           | $ | 160,712 |   | $ | 161,457 |   | $ | 161,556 |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

|                                          |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|----------------------------------------- |  | --------------- | ------ | ---------- | - | --------- | - | --------- | ------ | --------- | - | ---------- | - | --------- | ------ | --------- | - | ------ | - | - | ------ | - | - | ------ | -
|Worksite
  - New Large Case Activity      |  | Quarter
  Ended |       
|                                          |  |                
|                                          |  | 3/31/2007       |        | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |        | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |        | 6/30/2005 |  
|                                          |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |  
|Insurance
  premiums, net of reinsurance  |  | $               | 15,849 |            | $ | 8,813     |   | $         | 9,834  |           | $ | 5,167      |   | $         | 4,535  |           | $ | 1,824  |   | $ | 1,009  |   | $ | 96     |  
|Net investment
  income                   |  |                 |       |            |   |          |   |           |       |           |   |           |   |           |       |           |   |       |   |   |       |   |   |       |  
|Commissions and
  fee income              |  |                 |       |            |   |          |   |           |       |           |   |           |   |           |       |           |   |       |   |   |       |   |   |       |  
|Other income                              |  |                 | 108    |            |   | 209       |   |           |       |           |   |           |   |           |       |           |   |       |   |   |       |   |   |       |  
|                                          |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Total revenues                            |  |                 | 15,957 |            |   | 9,022     |   |           | 9,834  |           |   | 5,167      |   |           | 4,535  |           |   | 1,824  |   |   | 1,009  |   |   | 96     |  
|Policyholder
  benefits                   |  |                 | 17,373 |            |   | 8,337     |   |           | 7,804  |           |   | 3,413      |   |           | 3,072  |           |   | 1,137  |   |   | 623    |   |   | 70     |  
|Insurance
  commissions, net of deferrals |  |                 | 1,640  |            |   | 1,263     |   |           | 953    |           |   | 709        |   |           | 639    |           |   | 182    |   |   | 103    |   |   | 14     |  
|Expenses, taxes,
  fees and depreciation  |  |                 | 2,440  |            |   | 2,399     |   |           | 2,169  |           |   | 2,138      |   |           | 1,952  |           |   | 1,992  |   |   | 1,630  |   |   | 1,694  |  
|Amortization of
  DAC and VOBA (2)        |  |                 | 601    |            |   | 291       |   |           | 330    |           |   | 194        |   |           | 194    |           |   | 65     |   |   | 121    |   |   |       |  
|                                          |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Total benefits
  and expenses             |  |                 | 22,054 |            |   | 12,290    |   |           | 11,256 |           |   | 6,454      |   |           | 5,857  |           |   | 3,376  |   |   | 2,477  |   |   | 1,778  |  
|                                          |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Income (loss)
  before income taxes       |  |                 | (6,097 | )          |   | (3,268    | ) |           | (1,422 | )         |   | (1,287     | ) |           | (1,322 | )         |   | (1,552 | ) |   | (1,468 | ) |   | (1,682 | )
|(Provision) for
  income taxes            |  |                 | 2,134  |            |   | 1,144     |   |           | 498    |           |   | 450        |   |           | 463    |           |   | 543    |   |   | 514    |   |   | 589    |  
|                                          |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Operating income
  (loss) after tax       |  | $               | (3,963 | )          | $ | (2,124    | ) | $         | (924   | )         | $ | (837       | ) | $         | (859   | )         | $ | (1,009 | ) | $ | (954   | ) | $ | (1,093 | )
|                                          |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|                                          |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Benefit ratio (3)                         |  |                 | 109.6  | %          |   | 94.6      | % |           | 79.4   | %         |   | 66.1       | % |           | 67.7   | %         |   | 62.3   | % |   | 61.7   | % |   | 72.9   | %
|                                          |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|                                          |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Segment assets                            |  | $               | 25,932 |            | $ | 15,744    |   | $         | 11,934 |           | $ | 7,132      |   | $         | 4,738  |           | $ |       |   | $ |       |   | $ |       |  
|                                          |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  

Refer to page 27 for footnote descriptions

29

---



KMG
America Corporation
Quarterly Financial Supplement
First Quarter 2007

PRO FORMA SEGMENT QUARTERLY OPERATING RESULTS
(Unaudited) - Continued
(in thousands, except percentages)

|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|----------------------------------------- |  | --------------- | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|Senior market insurance business:         |  | Quarter
  Ended |        
|                                          |  |                
|                                          |  | 3/31/2007       |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|Insurance
  premiums, net of reinsurance  |  | $               | 10,778  |            | $ | 10,205    |   | $         | 9,901   |           | $ | 10,705     |   | $         | 10,675  |           | $ | 10,135  |   | $ | 10,376  |   | $ | 11,128  |  
|Net investment
  income                   |  |                 | 2,704   |            |   | 2,524     |   |           | 2,368   |           |   | 2,272      |   |           | 2,050   |           |   | 1,922   |   |   | 1,781   |   |   | 1,599   |  
|Commissions and
  fee income              |  |                 |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Other income                              |  |                 | 780     |            |   | 786       |   |           | 826     |           |   | 760        |   |           | 809     |           |   | 747     |   |   | 732     |   |   | 799     |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total revenues                            |  |                 | 14,262  |            |   | 13,515    |   |           | 13,095  |           |   | 13,737     |   |           | 13,534  |           |   | 12,804  |   |   | 12,889  |   |   | 13,526  |  
|Policyholder
  benefits                   |  |                 | 7,752   |            |   | 6,007     |   |           | 7,432   |           |   | 8,381      |   |           | 7,641   |           |   | 8,482   |   |   | 8,339   |   |   | 8,670   |  
|Insurance
  commissions, net of deferrals |  |                 | 1,380   |            |   | 1,267     |   |           | 1,253   |           |   | 1,269      |   |           | 1,367   |           |   | 1,240   |   |   | 1,294   |   |   | 1,472   |  
|Expenses, taxes,
  fees and depreciation  |  |                 | 731     |            |   | 744       |   |           | 715     |           |   | 734        |   |           | 765     |           |   | 770     |   |   | 1,098   |   |   | 988     |  
|Amortization of
  DAC and VOBA (2)        |  |                 | 327     |            |   | (37       | ) |           | 648     |           |   | 504        |   |           | 472     |           |   | 150     |   |   | (392    | ) |   | 425     |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total benefits
  and expenses             |  |                 | 10,190  |            |   | 7,981     |   |           | 10,048  |           |   | 10,888     |   |           | 10,245  |           |   | 10,642  |   |   | 10,339  |   |   | 11,555  |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Income before
  income taxes              |  |                 | 4,072   |            |   | 5,534     |   |           | 3,047   |           |   | 2,849      |   |           | 3,289   |           |   | 2,162   |   |   | 2,550   |   |   | 1,971   |  
|(Provision) for
  income taxes            |  |                 | (1,425  | )          |   | (1,937    | ) |           | (1,066  | )         |   | (997       | ) |           | (1,151  | )         |   | (757    | ) |   | (893    | ) |   | (690    | )
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Operating income
  after tax              |  | $               | 2,647   |            | $ | 3,597     |   | $         | 1,981   |           | $ | 1,852      |   | $         | 2,138   |           | $ | 1,405   |   | $ | 1,658   |   | $ | 1,281   |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Benefit ratio (3)                         |  |                 | 71.9    | %          |   | 58.9      | % |           | 75.1    | %         |   | 78.3       | % |           | 71.6    | %         |   | 83.7    | % |   | 80.4    | % |   | 77.9    | %
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Segment assets                            |  | $               | 264,624 |            | $ | 259,132   |   | $         | 255,013 |           | $ | 249,677    |   | $         | 239,985 |           | $ | 233,165 |   | $ | 225,457 |   | $ | 217,435 |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|----------------------------------------- |  | --------------- | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|Acquired business:                        |  | Quarter
  Ended |        
|                                          |  |                
|                                          |  | 3/31/2007       |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|Insurance
  premiums, net of reinsurance  |  | $               | (57     | )          | $ | 796       |   | $         | 631     |           | $ | 631        |   | $         | 629     |           | $ | 1,579   |   | $ | 941     |   | $ | 661     |  
|Net investment
  income                   |  |                 | 2,010   |            |   | 1,990     |   |           | 1,979   |           |   | 2,089      |   |           | 1,955   |           |   | 1,983   |   |   | 1,978   |   |   | 1,924   |  
|Commissions and
  fee income              |  |                 |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Other income                              |  |                 | 16      |            |   | 16        |   |           | 16      |           |   | 23         |   |           | 16      |           |   | 18      |   |   | 20      |   |   | 18      |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total revenues                            |  |                 | 1,969   |            |   | 2,802     |   |           | 2,626   |           |   | 2,743      |   |           | 2,600   |           |   | 3,580   |   |   | 2,939   |   |   | 2,603   |  
|Policyholder
  benefits                   |  |                 | 2,277   |            |   | 2,315     |   |           | 1,709   |           |   | 2,617      |   |           | 2,399   |           |   | 2,376   |   |   | 2,089   |   |   | 1,355   |  
|Insurance
  commissions, net of deferrals |  |                 | 89      |            |   | 90        |   |           | 91      |           |   | 91         |   |           | 94      |           |   | 99      |   |   | 98      |   |   | 103     |  
|Expenses, taxes,
  fees and depreciation  |  |                 | 596     |            |   | 724       |   |           | 595     |           |   | 593        |   |           | 608     |           |   | 695     |   |   | 675     |   |   | 667     |  
|Amortization of
  DAC and VOBA (2)        |  |                 | 140     |            |   | (141      | ) |           | (106    | )         |   | 125        |   |           | (72     | )         |   | (276    | ) |   | (258    | ) |   | (105    | )
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total benefits
  and expenses             |  |                 | 3,102   |            |   | 2,988     |   |           | 2,289   |           |   | 3,426      |   |           | 3,029   |           |   | 2,894   |   |   | 2,604   |   |   | 2,020   |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Income (loss)
  before income taxes       |  |                 | (1,133  | )          |   | (186      | ) |           | 337     |           |   | (683       | ) |           | (429    | )         |   | 686     |   |   | 335     |   |   | 583     |  
|(Provision) for
  income taxes            |  |                 | 397     |            |   | 65        |   |           | (118    | )         |   | 239        |   |           | 150     |           |   | (240    | ) |   | (117    | ) |   | (204    | )
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Operating income
  (loss) after tax       |  | $               | (736    | )          | $ | (121      | ) | $         | 219     |           | $ | (444       | ) | $         | (279    | )         | $ | 446     |   | $ | 218     |   | $ | 379     |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Benefit ratio (3)                         |  |                 | -3994.7 | %          |   | 290.8     | % |           | 270.8   | %         |   | 414.7      | % |           | 381.4   | %         |   | 150.5   | % |   | 222.0   | % |   | 205.0   | %
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Segment assets                            |  | $               | 159,761 |            | $ | 161,089   |   | $         | 163,274 |           | $ | 164,917    |   | $         | 169,470 |           | $ | 170,702 |   | $ | 173,097 |   | $ | 174,942 |  
|                                          |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

Refer to page 27 for footnote descriptions

30

---



KMG America Corporation
Quarterly Financial Supplement
First Quarter 2007

PRO FORMA SEGMENT QUARTERLY
OPERATING RESULTS (Unaudited) - Continued(in thousands, except percentages)

|                                                  |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|------------------------------------------------- |  | ------------- | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|Corporate
  and other:                            |  | Quarter Ended |        
|                                                  |  |              
|                                                  |  | 3/31/2007     |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                                  |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|                                                  |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Insurance premiums, net of reinsurance            |  | $             |        |            | $ |          |   | $         |        |           | $ |           |   | $         |        |           | $ |        |   | $ |        |   | $ |        |  
|Net investment income                             |  |               | 1,111   |            |   | 1,200     |   |           | 1,237   |           |   | 1,383      |   |           | 1,462   |           |   | 1,566   |   |   | 1,614   |   |   | 1,623   |  
|Commissions and fee income                        |  |               | 49      |            |   | 107       |   |           | 94      |           |   | 92         |   |           | 85      |           |   | 50      |   |   | 78      |   |   | 88      |  
|Gain on extinguishment of debt (KMG new activity) |  |               |        |            |   | 1,021     |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Other income                                      |  |               | 102     |            |   | 208       |   |           | 391     |           |   | 90         |   |           | 115     |           |   | 89      |   |   | 407     |   |   | 121     |  
|                                                  |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total revenues                                    |  |               | 1,262   |            |   | 2,536     |   |           | 1,722   |           |   | 1,565      |   |           | 1,662   |           |   | 1,705   |   |   | 2,099   |   |   | 1,832   |  
|Policyholder benefits                             |  |               |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Insurance commissions, net of deferrals           |  |               |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|Expenses, taxes, fees and depreciation            |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Kanawha legacy                                    |  |               | 1,416   |            |   | 1,459     |   |           | 1,566   |           |   | 1,472      |   |           | 1,450   |           |   | 1,427   |   |   | 1,191   |   |   | 1,659   |  
|KMG new activity                                  |  |               | 3,265   |            |   | 2,923     |   |           | 1,891   |           |   | 2,566      |   |           | 2,302   |           |   | 1,866   |   |   | 1,919   |   |   | 2,333   |  
|Amortization of DAC and VOBA (2)                  |  |               |        |            |   |          |   |           |        |           |   |           |   |           |        |           |   |        |   |   |        |   |   |        |  
|                                                  |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Total benefits and expenses                       |  |               | 4,681   |            |   | 4,382     |   |           | 3,457   |           |   | 4,038      |   |           | 3,752   |           |   | 3,293   |   |   | 3,110   |   |   | 3,992   |  
|                                                  |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Income before income taxes                        |  |               | (3,419  | )          |   | (1,846    | ) |           | (1,735  | )         |   | (2,473     | ) |           | (2,090  | )         |   | (1,588  | ) |   | (1,011  | ) |   | (2,160  | )
|(Provision) for income taxes                      |  |               | (5,621  | )          |   | 635       |   |           | 609     |           |   | 881        |   |           | 752     |           |   | 594     |   |   | 410     |   |   | 856     |  
|                                                  |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Operating income after tax                        |  | $             | (9,040  | )          | $ | (1,211    | ) | $         | (1,126  | )         | $ | (1,592     | ) | $         | (1,338  | )         | $ | (994    | ) | $ | (601    | ) | $ | (1,304  | )
|                                                  |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                                  |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Segment assets                                    |  | $             | 256,929 |            | $ | 230,975   |   | $         | 228,987 |           | $ | 206,034    |   | $         | 211,677 |           | $ | 221,683 |   | $ | 231,785 |   | $ | 227,294 |  
|                                                  |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

Refer to page 27 for footnote descriptions

31

---



KMG America Corporation
Quarterly Financial Supplement
First Quarter 2007

KMG
America Corporation
Reconciliation of Pro Forma Operating Income, Consolidated Statements of
Income, and Segment Assets (Unaudited)
(in thousands)

|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|------------------------------------------------------------------- |  | ------------- | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|Worksite insurance business:                                        |  | Quarter Ended |        
|                                                                    |  |              
|                                                                    |  | 3/31/2007     |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|(loss) Income before taxes as reported in GAAP financial
statements |  | $             | (5,206  | )          | $ | (288      | ) | $         | 1,245   |           | $ | 7,185      |   | $         | 31      |           | $ | 499     |   | $ | (823    | ) | $ | 119     |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                                                   
|Pro forma adjustments:                                              |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Reallocation of investment income                                   |  |               |        |            |   |          |   |           |        |           |   | 112        |   |           | 144     |           |   | 130     |   |   | 178     |   |   | 51      |  
|Reallocation of policy reserves                                     |  |               |        |            |   |          |   |           |        |           |   | (5,972     | ) |           | 282     |           |   | 40      |   |   | 40      |   |   | 40      |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Subtotal                                                            |  |               | (5,206  | )          |   | (288      | ) |           | 1,245   |           |   | 1,325      |   |           | 457     |           |   | 669     |   |   | (605    | ) |   | 210     |  
|less portion of Worksite attributed to new large case
activity:     |  |               | (6,097  | )          |   | (3,268    | ) |           | (1,422  | )         |   | (1,287     | ) |           | (1,322  | )         |   | (1,552  | ) |   | (1,468  | ) |   | (1,682  | )
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Pro forma income before taxes                                       |  |               | 891     |            |   | 2,980     |   |           | 2,667   |           |   | 2,612      |   |           | 1,779   |           |   | 2,221   |   |   | 863     |   |   | 1,892   |  
|Taxes @ 35%                                                         |  |               | (312    | )          |   | (1,043    | ) |           | (933    | )         |   | (914       | ) |           | (623    | )         |   | (777    | ) |   | (302    | ) |   | (662    | )
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Pro forma operating income after taxes - Worksite legacy            |  | $             | 579     |            | $ | 1,937     |   | $         | 1,734   |           | $ | 1,698      |   | $         | 1,156   |           | $ | 1,444   |   | $ | 561     |   | $ | 1,230   |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Assets as reported in GAAP financial statements                     |  | $             | 179,721 |            | $ | 170,761   |   | $         | 167,949 |           | $ | 163,926    |   | $         | 168,693 |           | $ | 166,402 |   | $ | 167,107 |   | $ | 167,166 |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Reallocation of assets                                              |  |               |        |            |   |          |   |           |        |           |   |           |   |           | (5,972  | )         |   | (5,690  | ) |   | (5,650  | ) |   | (5,610  | )
|less portion of Worksite attributed to new large case
activity:     |  |               | (25,932 | )          |   | (15,744   | ) |           | (11,934 | )         |   | (7,132     | ) |           | (4,738  | )         |   |        |   |   |        |   |   |        |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Pro forma assets - Worksite legacy business                         |  | $             | 153,789 |            | $ | 155,017   |   | $         | 156,015 |           | $ | 156,794    |   | $         | 157,983 |           | $ | 160,712 |   | $ | 161,457 |   | $ | 161,556 |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|------------------------------------------------------------------- |  | ------------- | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|Senior market insurance business:                                   |  | Quarter Ended |        
|                                                                    |  |              
|                                                                    |  | 3/31/2007     |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|(loss) Income before taxes as reported in GAAP
financial statements |  | $             | 4,072   |            | $ | 5,534     |   | $         | 3,047   |           | $ | (36,239    | ) | $         | 1,756   |           | $ | 1,030   |   | $ | 1,458   |   | $ | 1,003   |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Pro forma adjustments:                                              |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Reallocation of investment income                                   |  |               |        |            |   |          |   |           |        |           |   | 706        |   |           | 639     |           |   | 625     |   |   | 586     |   |   | 462     |  
|Reallocation of policy reserves                                     |  |               |        |            |   |          |   |           |        |           |   | 38,382     |   |           | 894     |           |   | 507     |   |   | 506     |   |   | 506     |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Pro forma income before taxes                                       |  |               | 4,072   |            |   | 5,534     |   |           | 3,047   |           |   | 2,849      |   |           | 3,289   |           |   | 2,162   |   |   | 2,550   |   |   | 1,971   |  
|Taxes @ 35%                                                         |  |               | (1,425  | )          |   | (1,937    | ) |           | (1,066  | )         |   | (997       | ) |           | (1,151  | )         |   | (757    | ) |   | (893    | ) |   | (690    | )
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Pro forma operating income after taxes                              |  | $             | 2,647   |            | $ | 3,597     |   | $         | 1,981   |           | $ | 1,852      |   | $         | 2,138   |           | $ | 1,405   |   | $ | 1,658   |   | $ | 1,281   |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Assets as reported in GAAP financial statements                     |  | $             | 264,624 |            | $ | 259,132   |   | $         | 255,013 |           | $ | 249,677    |   | $         | 201,603 |           | $ | 193,889 |   | $ | 185,675 |   | $ | 177,147 |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Reallocation of assets                                              |  |               |        |            |   |          |   |           |        |           |   |           |   |           | 38,382  |           |   | 39,276  |   |   | 39,782  |   |   | 40,288  |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Pro forrma assets                                                   |  | $             | 264,624 |            | $ | 259,132   |   | $         | 255,013 |           | $ | 249,677    |   | $         | 239,985 |           | $ | 233,165 |   | $ | 225,457 |   | $ | 217,435 |  
|                                                                    |  |               |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

Note: Pro forma reconciling
adjustments reflect the reclassification of policy reserves, assets and
corresponding investment income between the Kanawha legacy reporting segments
that relate to the implementation of the final purchase GAAP reserves as if the
implementation occurred as of December 31, 2004. The reclassifications by
segment did not impact total company results.

32

---



KMG America Corporation
Quarterly Financial Supplement
First Quarter 2007

KMG
America Corporation
Reconciliation of Pro Forma Operating Income, Consolidated Statements of
Income, and Segment Assets (Unaudited) - Continued
(in thousands)

|                                                                      |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|--------------------------------------------------------------------- |  | --------------- | ------- | ---------- | - | --------- | - | --------- | ------- | --------- | - | ---------- | - | --------- | ------- | --------- | - | ------- | - | - | ------- | - | - | ------- | -
|Acquired insurance business:                                          |  | Quarter
  Ended |        
|                                                                      |  |                 |        
|                                                                      |  | 3/31/2007       |         | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |         | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |         | 6/30/2005 |  
|                                                                      |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |  
|(loss) Income before taxes as reported in
  GAAP financial statements |  | $               | (1,133  | )          | $ | (186      | ) | $         | 337     |           | $ | 31,744     |   | $         | 773     |           | $ | 1,214   |   | $ | 769     |   | $ | 1,120   |  
|                                                                      |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Pro forma adjustments:                                                |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Reallocation of investment income                                     |  |                 |        |            |   |          |   |           |        |           |   | (17        | ) |           | (26     | )         |   | 19      |   |   | 112     |   |   | 9       |  
|Reallocation of policy reserves                                       |  |                 |        |            |   |          |   |           |        |           |   | (32,410    | ) |           | (1,176  | )         |   | (547    | ) |   | (546    | ) |   | (546    | )
|                                                                      |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                                                      |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Pro forma income before taxes                                         |  |                 | (1,133  | )          |   | (186      | ) |           | 337     |           |   | (683       | ) |           | (429    | )         |   | 686     |   |   | 335     |   |   | 583     |  
|Taxes @ 35%                                                           |  |                 | 397     |            |   | 65        |   |           | (118    | )         |   | 239        |   |           | 150     |           |   | (240    | ) |   | (117    | ) |   | (204    | )
|                                                                      |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Pro forma operating income (loss) after
  taxes                       |  | $               | (736    | )          | $ | (121      | ) | $         | 219     |           | $ | (444       | ) | $         | (279    | )         | $ | 446     |   | $ | 218     |   | $ | 379     |  
|                                                                      |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                                                      |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Assets as reported in GAAP financial
  statements                     |  | $               | 159,761 |            | $ | 161,089   |   | $         | 163,274 |           | $ | 164,917    |   | $         | 201,880 |           | $ | 204,288 |   | $ | 207,229 |   | $ | 209,620 |  
|                                                                      |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Reallocation of assets                                                |  |                 |        |            |   |          |   |           |        |           |   |           |   |           | (32,410 | )         |   | (33,586 | ) |   | (34,132 | ) |   | (34,678 | )
|                                                                      |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|                                                                      |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  
|Pro forrma assets                                                     |  | $               | 159,761 |            | $ | 161,089   |   | $         | 163,274 |           | $ | 164,917    |   | $         | 169,470 |           | $ | 170,702 |   | $ | 173,097 |   | $ | 174,942 |  
|                                                                      |  |                 |         |            |   |           |   |           |         |           |   |            |   |           |         |           |   |         |   |   |         |   |   |         |  

|                                                                      |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|--------------------------------------------------------------------- |  | --------------- | ------ | ---------- | - | --------- | - | --------- | ------ | --------- | - | ---------- | - | --------- | ------ | --------- | - | ------ | - | - | ------ | - | - | ------ | -
|Corporate
  and Other:                                                |  | Quarter
  Ended |       
|                                                                      |  |                 |       
|                                                                      |  | 3/31/2007       |        | 12/31/2006 |   | 9/30/2006 |   | 6/30/2006 |        | 3/31/2006 |   | 12/31/2005 |   | 9/30/2005 |        | 6/30/2005 |  
|                                                                      |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |  
|(loss) Income before taxes as reported in
  GAAP financial statements |  | $               | (3,530 | )          | $ | (995      | ) | $         | (1,909 | )         | $ | (1,726     | ) | $         | (1,319 | )         | $ | (893   | ) | $ | 2      |   | $ | (1,619 | )
|                                                                      |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Reconciliation to pro forma operating
  income:                       |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Exclude realized gains (losses)                                       |  |                 | 53     |            |   | (1,115    | ) |           | (7     | )         |   | 115        |   |           | (211   | )         |   | (34    | ) |   | (278   | ) |   | (19    | )
|Exclude offsetting deferred compensation
  expense *                  |  |                 | 58     |            |   | 264       |   |           | 181    |           |   | (61        | ) |           | 197    |           |   | 113    |   |   | 141    |   |   | 0      |  
|Reallocation of investment income                                     |  |                 |       |            |   |          |   |           |       |           |   | (801       | ) |           | (757   | )         |   | (774   | ) |   | (876   | ) |   | (522   | )
|                                                                      |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|                                                                      |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Pro forma income before taxes                                         |  |                 | (3,419 | )          |   | (1,846    | ) |           | (1,735 | )         |   | (2,473     | ) |           | (2,090 | )         |   | (1,588 | ) |   | (1,011 | ) |   | (2,160 | )
|Taxes                                                                 |  |                 | (5,621 | )          |   | 635       |   |           | 609    |           |   | 881        |   |           | 752    |           |   | 594    |   |   | 410    |   |   | 856    |  
|                                                                      |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  
|Pro forma operating income (loss) after
  taxes                       |  | $               | (9,040 | )          | $ | (1,211    | ) | $         | (1,126 | )         | $ | (1,592     | ) | $         | (1,338 | )         | $ | (994   | ) | $ | (601   | ) | $ | (1,304 | )
|                                                                      |  |                 |        |            |   |           |   |           |        |           |   |            |   |           |        |           |   |        |   |   |        |   |   |        |  

*    Offsetting
expense for realized gains(losses) related to executive deferred compensation
trading activity

Note:
Pro forma reconciling adjustments reflect the reclassification of policy
reserves, assets and corresponding investment income between the Kanawha legacy
reporting segments that relate to the implementation of the final purchase GAAP
reserves as if the implementation occurred as of December 31, 2004. The reclassifications
by segment did not impact total company results.

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