KMG America Corporation Promotes Dale Vaughan to President of Kanawha

MINNEAPOLIS, Feb. 25 /PRNewswire-FirstCall/ -- KMG America Corporation today announces that R. Dale Vaughan has been promoted to President and Chief Operating Officer of Kanawha Insurance Company. He will remain President of Kanawha HealthCare Solutions. KMG America's purchase of Kanawha Insurance Company on December 21, 2004, was an important step in building a nationally recognized company that provides employee benefit products and administrative services to employers and employees, and products for senior Americans.

Stanley D. Johnson will remain Chairman and CEO of Kanawha Insurance Company. "Mr. Vaughan has been instrumental in the integration of Kanawha Insurance Company and KMG America. His knowledge and leadership have strongly influenced this company over the past decade. This promotion will expand his influence within KMG America," stated Mr. Johnson.

Kenneth Kuk, Chairman, President and Chief Executive Office of KMG America says of the promotion, "We have been truly impressed by Mr. Vaughan's achievements in creating a solid business platform. I have high expectations for KMG America's performance and I know Dale will be a key contributor to the growth of our organization."

Mr. Vaughan began his Kanawha career in 1990 managing the group underwriting function, and was given the additional responsibility of leading Kanawha's third party administrator (TPA) operations, a role he will retain. Under his leadership, Kanawha HealthCare Solutions grew significantly in size and scope, and has become a well-respected TPA throughout the industry.

"KMG America Corporation has a solid business strategy to become a leader in the employee benefits market. As President and Chief Operating Officer, I will work to implement that vision. We have in place a solid senior management team and an outstanding group of associates. We have many challenges ahead, but I am confident that we will be successful."

This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause KMG America Corporation's actual results to differ materially from those expressed in the forward- looking statements including, but not limited to: implementation of our business strategy; hiring and retaining key employees; predicting and managing claims and other costs; fluctuations in our investment portfolio; financial strength ratings of our 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.