KMG America Reports Q3 2007 Earnings Results and Provides Update on Merger Approval Process

Business Wire, Nov 5, 2007

KMG America Investor Webcast Today, Monday, November 5th at 10:00 A.M. Eastern Standard Time

MINNEAPOLIS -- KMG America Corporation (the "Company" or "KMG America") (NYSE:KMA) today reported a net loss of $0.4 million, or $0.02 per diluted share for Q3 2007 compared to net income of $0.6 million, or $0.03 per diluted share for Q2 2007. The Company also provided a brief update on the approval process of Humana's agreement to acquire the Company.

UPDATE ON HUMANA ACQUISITION APPROVAL PROCESS

As previously announced, on Friday, September 7, 2007, KMG America signed a definitive agreement to merge with a subsidiary of Humana Inc. for cash consideration of $6.20 for each outstanding share of the Company. The aggregate transaction price will be approximately $187.7 million (including assumed debt of approximately $50 million).

The merger was unanimously approved by the boards of directors of the Company and Humana Inc. The merger is subject to customary closing conditions, including approval by the Company's shareholders and receipt of governmental and regulatory approvals, including the approval of the South Carolina Department of Insurance ("SCDOI"). The following summarizes the status, as of the date of this release, of the shareholder and governmental and regulatory approval process:

* The Federal Trade Commission and Antitrust Division of the U.S. Department of Justice have granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

* The Company announced November 16, 2007, as the date for a special meeting of KMG America shareholders to vote on the proposed acquisition.

* The Company has mailed a definitive proxy statement for the special meeting to its shareholders of record as of the close of business on October 12, 2007, the record date established for the special meeting.

* Humana Inc. has filed documents with the SCDOI seeking approval of the acquisition and is awaiting the SCDOI's final determination.

The closing of the merger is expected to occur late in the fourth quarter of 2007, possibly as early as November 30, 2007.

THIRD QUARTER FINANCIAL RESULTS

The Company today reported a net loss of $0.4 million, or $0.02 per diluted share, for Q3 2007 compared to Q2 2007 net income of $0.6 million, or $0.03 per diluted share. The decline in Q3 2007 earnings results compared to Q2 2007 is attributed primarily to an increase in long term care incurred claims.

Q3 2007 net earnings also include $1.2 million of transaction expenses associated with the pending merger offset by the favorable impact of the cancellation, for no consideration, of stock options previously awarded to the Company's executive management.

WEBCAST

The Company will host an investor and analyst webcast today, Monday, November 5, 2007, at 10:00 a.m. Eastern Standard Time. The webcast and replay will be available via: www.kmgamerica.com, analyst/investor tab - for all investors; www.streetevents.com - for institutional investors; and www.earnings.com - for retail investors. The replay will be available starting approximately two hours after the original webcast. The replay will be available through Monday, November 19, 2007.

ABOUT KMG AMERICA CORPORATION

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

FORWARD LOOKING INFORMATION

This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause the Company's actual results to differ materially from those expressed in the forward-looking statements including, but not limited to: implementation of its business strategy; hiring and retaining key employees; predicting and managing claims and other costs; fluctuations in its investment portfolio; financial strength ratings of its insurance subsidiary; government regulations, policies and investigations affecting the insurance industry; competitive insurance products and pricing; reinsurance costs; fluctuations in demand for insurance products; possible recessionary trends in the U.S. economy; the shareholders of KMG America may not approve and adopt the proposed merger; the parties to the merger may be unable to obtain governmental and regulatory approvals required for the merger; required governmental or regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the merger; the parties may be unable to complete the merger because, among other reasons, conditions to the closing of the merger may not be satisfied or waived; 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.