Executives at the holding company that bought Kanawha Insurance Company in 2004 are engaged in “advanced negotiations” with parties that might want to acquire the holding company.

Kenneth Kuk, chief executive officer of KMG America Corp., Minneapolis, discussed KMG’s “review of strategic alternatives in a statement included with the company’s second-quarter earnings release.

KMG is reporting $559,000 in net income for the second quarter on $55 million in revenue, compared with $1 million in net income on $43 million in revenue for the second quarter of 2006.

Earned premiums were down at the old Kanawha business and for worksite policies at the company’s “legacy worksite” business.

KMG earlier reported increasing reserves because of concerns about claims at its medical stop-loss program.

Stop-loss claims have stabilized, but large-case sales fell to $4.5 million, from $8.2 million, in part because of the company’s decision to de-emphasize stop-loss sales, KMG says.

KMG now is trying to put more emphasis on selling group and voluntary products through the worksite, the company says.

Kuk says KMG’s review of strategic alternatives is progressing well.

“We are currently in negotiations and expect to provide an update as to the ultimate outcome within the next few weeks,” Kuk says. “While we remain optimistic, we must reiterate that there are no guarantees that this process will result in a transaction.”

KMG’s sales channels are producing a reasonable level of sales, under the circumstances, and the company’s block of long term care insurance business is performing at a satisfactory level, Kuk says.