SecProbe.io

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Mail Stop 3-09							August 31, 2004

Mr. Kenneth U. Kuk
Chairman, President & Chief Executive Officer and Secretary
KMG America Corporation
6306 Maple Ridge
Excelsior, Minnesota 55331

Re:	KMG America Corporation
	Registration Statement on Form S-1
	File Number 333-117911

Dear Mr. Kuk:

We have reviewed your filing and have the following comments.  Where
indicated, we think you should revise your document in response to
these comments.  If you disagree, we will consider your explanation
as to why our comment is inapplicable or a revision is unnecessary.
Please be as detailed as necessary in your explanation.  In some of
our comments, we may ask you to provide us with supplemental
information so we may better understand your disclosure.  After
reviewing this information, we may or may not raise additional
comments.

Please understand that the purpose of our review process is to assist
you in your compliance with the applicable disclosure requirements
and to enhance the overall disclosure in your filing.  We look
forward to working with you in these respects.  We welcome any
questions you may have about our comments or on any other aspect of
our review.  Feel free to call us at the telephone numbers listed at
the end of this letter.

Form S-1

Comments Applicable to the Entire Prospectus
1. Please note that when you file a pre-effective amendment
containing pricing-related information, we may have additional
comments.
2. Please note that when you file a pre-effective amendment that
includes your price range, it must be bone fide. We interpret this to
mean that your range may not exceed $2 if you price below $20 and 10%
if you price above $20.
3. Please note that where we provide examples to illustrate what we
mean by our comments, they are examples and not complete lists.  If
our comments are applicable to portions of the filing that we have
not cited as examples, please make the appropriate changes in
accordance with our comments.
4. Where comments on one section also relate to disclosure in another
section, please make parallel changes to all affected disclosures.
This will eliminate the need for us to repeat similar comments.
5. Please provide us proofs of all graphic, visual or photographic
information you will provide in the printed prospectus prior to its
use, for example in a preliminary prospectus.  Please note we may
have comments regarding this material.
6. Please provide us annotated documentary support for the following
statements or revise your filing appropriately:

* ". . . most worksite insurance companies, which generally do not
offer equity incentives to their sales and marketing personnel."
(page 3)
* "As a result, many companies have reassessed how they deploy
capital and in many cases, multi-line companies have chosen to shift
capital away, or withhold further capital from, their life and health
insurance divisions."  (page 88)
* "The current difficult investment environment has led a number of
multi-line insurance companies in the United States and Europe to
divest some or all of their life and health insurance and/or annuity
operations."  (pages 88-89)
* "There has been some consolidation in the life and health insurance
industry over the last few years."  (page 89)
* "Based on 2003 revenues, Kanawha ranks in the top 10% of the 386
third-party plan administrators that are members of the Society of
Professional Benefit Administrators." (page 96)
7. Please eliminate the jargon and technical terms in the forepart of
your prospectus.  For example, these words and phrases appear in your
summary and risk factors sections:
* "voluntary insurance"
* "group insurance"
* "in force"
* "managed care services"
* "risk-adjusted returns"
* "reinsurance"
* "investment grade securities"
* "ceded reinsurance"
* "coinsurance contracts"
* "separate accounts"
* "surrender charges"

Instead, please explain these concepts in concrete, everyday
language.  Further, place any industry terms you use in context so
those potential investors who do not work in your industry can
understand the disclosure. See Rule 421(d)(2)(ii) of Regulation C.

8. We note your use of the following acronyms in the forepart of your
prospectus:  VBOs, VOBA, SAP, HIPAA, DAC and NAIC.  Please reduce
your over-reliance on such acronyms in the forepart of the prospectus
and please define these acronyms where first used.
9. If you must include jargon or technical terms in the main body of
the prospectus (as opposed to the forepart of the prospectus), you
must make every effort to concisely explain these terms where you
first use them.  Where this is simply not possible, a glossary is
permissible.
10. We note that you refer to estimates prepared by Eastbridge
Consulting Group, Inc. on pages 2, 4, 85 and 94.  Please tell us who
Eastbridge Consulting Group, Inc. is and how they arrived at these
estimates.  Please disclose any payments you have made or received
from Eastbridge and any relationship you have or have had with them.
11. We note your statement on pages 4 and 85 that "Life and health
insurance industry premiums, including annuities, in the United
States exceeded $500 billion for the year 2002, with approximately
$200 billion of statutory equity capital for the year 2002 . . . ."
We believe that reference to this $500 billion industry figure is
inappropriate as it is much broader than the market you expect to
target.  Please revise or explain.
12. We note the following statements you have made regarding cycles
in the industry and believe that some of these statements appear to
be inconsistent.  Please revise or explain as appropriate.

* "Because we believe our product offerings generally will not be
correlated to each other or the general economy, we do not expect our
results of operations to be significantly impacted by pricing
cycles." (Pages 1 and 94)  Since your statement in the next bullet
point indicates that your industry is not subject to pricing cycles,
we do not understand why you discuss how your product offering will
not be impacted by pricing cycles.

* "As a result, the life and health insurance business has relatively
low underwriting risk compared to the property and casualty insurance
business and is not subject to `commodity-like` pricing cycles . . .
." (Pages 4 and 85)  If your industry is not subject to pricing
cycles, we do not understand how your business may be materially
adversely affected by insurance industry cycles as stated in the next
bullet point.

* "Our results of operations and financial condition may be
materially adversely affected from time to time by . . . insurance
industry cycles . . . ." (Page 17)

* "While the life and health insurance industry has historically
experienced some degree of cyclicality due to variability in market
conditions and levels of competition in some product lines, we
believe, as a whole, variability in industry performance and
financial condition has been significantly less than that of the
property and casualty segment of the insurance industry." (Page 85)
This statement about some degree of cyclicality in your industry
appears to contradict your statement in the second bullet point that
your industry is not subject to pricing cycles.
13. Please tell us who the significant shareholders of Kanawha are,
the percentage of Kanawha shares beneficially owned, if any of these
persons or entities has a relationship with the company and the
amount of the acquisition consideration you expect these shareholders
will receive
14. Please supplementally confirm to us that the offering cannot be
completed without the consummation of the acquisition.  We may have
additional comments.

Pages i and ii
15. Please relocate the three sections located on these pages so that
they appear somewhere after the Risk Factors section in the filing.
16. We note your statement that "Market data and forecasts used in
this prospectus have been obtained from independent industry sources
as well as from research reports prepared for other purposes.  We
have not independently verified the data obtained from these sources
and we cannot assure you of the accuracy or completeness of the
data."  It is not appropriate to disclaim liability for statements
included in your registration statement.  Please revise to delete
this language.

Prospectus Summary, pages 1-13
17. It appears that a key part of your business strategy is to offer
both voluntary and group insurance.  To the extent practicable,
please disclose what percentage of your current insurance business is
comprised of each of voluntary and group insurance?
18. We note that currently you only appear to discuss the positive
aspects of your company and its strategy in the summary.  The summary
section should provide a brief, but balanced description of the key
aspects of the company as of the latest practicable date.  Please
revise the summary to also discuss any negative aspects of your
company`s experience, strategy and prospects.   For example, you
should include disclosure discussing the risks involved in your
aggressive growth strategy.  Please also note that the balancing
disclosure you provide should be no less prominent than your positive
disclosure. This also means that you cannot satisfy the comment by
merely providing a cross-reference to the risk factors section.
19. We note that on pages 3 and 94 you state your target market is
comprised of workplaces with 50 to 10,000 employees and includes over
290,000 businesses, but on pages 93 and 99 you state that you intend
to market your products to employers with 500 to 10,000 employees.
In addition, on page 99, you give 230,000 as the number of businesses
in your target market. Please explain or rectify these discrepancies.
20. Please revise your disclosure on page 6 and page 106 so that the
income figure you disclose includes the $1.6 million payment.  You
may then explain that there was a one-time $1.6 million payment.

Summary Unaudited Pro Forma Financial Information, page 9
21. If the reference is retained, please name the third-party
valuation experts assisting in determining the fair value of assets
and liabilities, update the "Expert" section of the filing, and
include a consent.

Risk Factors, pages 14-37

General
22. Please consider grouping related risk factors together under
three classified headings, instead of just two, such as risks related
to your company, risks related to your industry and risks related to
your offering.
23. Please revise the risk factors where appropriate to replace
generic language with specific disclosure of exactly how these risks
have affected and will affect your operations, financial condition or
business, and if practicable to quantify, the specific and immediate
effects to investors of each risk that you have identified.  For
example, you use general phrases such as "adversely affected" and
"material adverse affect" throughout the risk factor section.  These
vague, generic phrases are subject to varying interpretations and,
therefore, do not adequately explain the risk or concern to which you
refer.
24. Please revise each subheading to ensure it reflects the risk that
you discuss in the text.  Many of your subheadings currently either
merely state a fact about your business, such as "We will be
dependent on independent agents and brokers to market many of our
products." or describe an event that may occur in the future, such as
"Our services may expose us to professional liability in excess of
our insurance coverage."  Succinctly state in your subheadings the
risks that result from the facts or uncertainties.  You may find it
helpful to use an "if...then" approach to writing the subheadings,
where "if" denotes the risk and the "then" discloses the specific
adverse consequences of that risk.  Please note that these risk
factors have been provided only as examples.  Please carefully review
each subheading and revise as appropriate.

"If we are unable to implement our business strategy or operate our
business as we currently expect, our business, results of operations
or financial condition may be adversely affected."  Page 14
25. Please revise your disclosure in this risk factor to emphasize
that heretofore you have had a small presence in the southeastern
U.S. targeting a niche market of small employers and groups, but that
your business strategy hinges on transforming the Company into a
national life and health insurance company targeting large employers.

"We may require additional capital in the future which may not be
available on favorable terms or at all." Page 14
26. Please revise your disclosure in this risk factor to briefly
describe your "business plan."  This additional disclosure will help
investors better understand the impact of a change in your capital
resources or requirements.
27. To the extent practicable, please quantify your future capital
requirements.
28. To the extent practicable, please indicate the amount you expect
to borrow under a credit facility following the closing of this
offering and what you expect to use such amounts for.

"We will depend on our key executives. We may not be able to hire and
retain key employees or successfully integrate our new management
team . . . ." Pages 14-15
29. Please revise to disclose the number of additional managers you
expect to hire to implement your business strategy.
30. To the extent that you have experienced problems attracting and
retaining key executives in the recent past, please revise to
describe these problems.  Additionally, if any key employee has plans
to retire or leave your company in the near future, please revise the
discussion to disclose this information.
31. Please state whether you maintain or will maintain employment
contracts with key personnel and disclose the term and termination
provisions of the same if applicable.
32. Please disclose whether you have key life insurance policies on
any key employees.
33. Please tell us if it is the industry standard to have non-
solicitation and non-compete clauses in employment agreements and
whether any of your employees` contracts contain or will contain
those clauses.

"Our future performance cannot be predicted based on the financial
information included in this prospectus." Pages 15-16
34. Please revise to briefly explain here the key reasons why
Kanawha`s business is not representative of your primary business
strategy.  We believe this information here will provide more context
to an investor reviewing this risk factor.

"Our services may expose us to professional liability in excess of
our insurance coverage." Page 16
35. Please disclose your level of your insurance coverage.  Please
also disclose the cost to you of such coverage, if material.

"We will be dependent on independent agents and brokers to market
many of our products." Pages16-17
36. Please disclose if you rely on any one particular agent, broker
or group of either to sell or promote your products. To the extent
that you have agents, brokers or groups of either that you are
substantially dependent upon, file copies of any agreements with
these parties as exhibits to your registration statement and revise
your Business section to describe the material terms of these
agreements.
37. To the extent that you have experienced difficulties in
recruiting or hiring qualified agents and brokers, revise to discuss
these difficulties.

"Our business, results of operations and financial condition may be
adversely affected by many factors beyond our control . . . ." Pages
17-18
38. Please discuss the extent to which the factors you have
enumerated have affected your business in the past.  To the extent
practicable, please quantity the impact these factors have had on
your business.
39. You should also elaborate on the five general economic, financial
and political conditions at the bottom of page 17 that may adversely
affect your business.  These bullet points, as written, are not
sufficient