Ceres Group Reports First Quarter 2006 Results

For the quarter:

-- Net income of $5.5 million ($0.17 per share)

-- Senior Segment pre-tax income of $5.7 million

-- Medical Segment pre-tax income of $3.2 million

Ceres Group, Inc. (NASDAQ:CERG) today reported net income of $5.5million ($0.17 per share) for the first quarter of 2006, including$0.1 million from net realized investment gains. This compares to netincome of $4.8 million ($0.14 per share) for the first quarter of2005, including $0.5 million ($0.02 per share) from net realizedinvestment losses, and a $1.0 million ($0.03 per share) benefitrelated to the reduction of federal income tax reserves associatedwith the elimination of the company's untaxed policyholder surplusaccount exposure.

"We are pleased with our strong first quarter results," said TomKilian, president and chief executive officer of Ceres. "Both of oursegments had increased profits and overall new sales rose."

In addition, as announced on Monday, Ceres has entered into adefinitive merger agreement with Great American Financial Resources,Inc. (GAFRI) (NYSE:GFR), whereby GAFRI will acquire all of theoutstanding shares of common stock of Ceres through a cash merger.Under the terms of the merger agreement, GAFRI will pay $6.13 in cashfor each outstanding share of Ceres common stock, for a total equityprice of approximately $205 million on a fully diluted basis.

"We believe that Ceres and GAFRI are an excellent strategic fit,"Kilian added. "This merger will produce a much larger senior marketpresence and strengthened combined competitive position. We arecommitted to working with GAFRI on a smooth transition."

Segment Results

Ceres reports its financial results in two primary businesssegments: Senior and Medical.

Senior Segment (Medicare supplement, long-term care, dental, lifeinsurance, and annuities)

Pre-tax income for the quarter was $5.7 million. This compares topre-tax income of $3.3 million in the first quarter of 2005, including$0.9 million from net realized investment losses.

Benefits, claims, losses and settlement expenses in the SeniorSegment were $41.4 million, compared to $38.5 million in the firstquarter of 2005. The Senior Segment benefit and claims loss ratio was74.8%, compared to 76.9% in the first quarter of 2005. The improvementin the Senior Segment loss ratio in the first quarter of 2006 was dueprimarily to favorable long-term care experience partially offset byan increase in the Medicare supplement loss ratio from 71.9% in thefirst quarter of 2005 to 74.0% in the first quarter of 2006. TheMedicare supplement loss ratio is still expected to be approximately72% for the full year 2006.

Based on current new sales trends and slightlyhigher-than-expected lapse rates on the company's Medicare supplementbusiness related to the 2006 rate increases, Senior Segment premiumsare now expected to increase approximately 11% in 2006.

"While new sales in our Senior Segment were not as strong as wehad anticipated, we are pleased with the progress being made in ournew career division, Ceres Senior Benefits, LLC (CSB)," Kilian said."At the end of the first quarter, we had contracted 25 regional salesmanagers and 334 agents at CSB, and our 2006 sales results have beenpromising."

Medical Segment (catastrophic and comprehensive medical plans)

Pre-tax income for the quarter was $3.2 million. This compares topre-tax income of $3.1 million in the first quarter of 2005, including$0.1 million from net realized investment losses.

Benefits, claims, losses and settlement expenses in the MedicalSegment were $40.1 million, compared to $38.9 million in the firstquarter of 2005. The Medical Segment benefit and claims loss ratio was71.8%, compared to 68.8% in the first quarter of 2005. The firstquarter 2006 loss ratio was primarily impacted by a strengthening ofclaim reserves and an increase in January in-patient hospital stays.Due to seasonality, the Medical Segment loss ratio is expected toincrease through the balance of the year.

Due to continued increased new sales, Medical Segment premiums areexpected to increase approximately 5% in 2006.

"Sales in our Medical Segment rose significantly compared to thesame quarter last year, which resulted in improved expense coveragefor this segment in 2006," Kilian said. "Currently, we are rolling outthe new rates and additional benefit level options on our brokerageAdvantage Series, as well as offering these products through specialmarketing relationships. We are pleased with the popularity of theseplans. They offer extensive options for customers and agents and areexpected to produce attractive profit margins."

Outlook

"We will continue to execute our core strategy of growth in ourSenior Segment and stability and targeted growth in our MedicalSegment," Kilian said. "In addition, we will work with the GAFRItransition team to implement the merger transaction we announced onMonday."

As previously announced, the company expects to achieve net incomein a range of $0.50 per diluted share for 2006, based on continuedgrowth in the company's Senior Segment, and stabilization of therevenue decline and improved claims trends in the company's MedicalSegment. In the company's outlook for 2006, projected net income pershare excludes the impact of net realized investment gains or losses.

A conference call with management regarding first quarter 2006results and the contemplated merger is scheduled for 10:00 a.m.(Eastern) on Thursday, May 4, 2006. To listen to the live call overthe Internet, go to www.ceresgp.com orhttp://phx.corporate-ir.net/playerlink.zhtml?c=71415&s=wm&e=1306704.To listen to the webcast, please log onto this site at least 15minutes prior to the call to register, download and install anynecessary audio software. For those who cannot listen to the livebroadcast, a replay will be available after the call.
FINANCIAL TABLES TO FOLLOW


CERES GROUP, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(in thousands, except per share amounts)

Three Months Ended
March 31,
-------------------
2006 2005
--------- ---------
REVENUES
Premiums, net
Medical $ 55,827 $ 56,566
Senior and other 55,367 50,070
-------- --------
Total premiums, net 111,194 106,636
Net investment income 6,974 6,083
Net realized gains (losses) 109 (840)
Fee and other income 4,627 4,588
-------- --------
122,904 116,467
-------- --------
BENEFITS, LOSSES AND EXPENSES
Benefits, claims, losses and settlement expenses
Medical 40,058 38,920
Senior and other 41,419 38,486
-------- --------
Total benefits, claims, losses and
settlement expenses 81,477 77,406
Selling, general and administrative expenses 35,323 32,512
Net (deferral) amortization and change in
acquisition costs and value of business acquired (2,593) 441
Interest expense and financing costs 159 175
-------- --------
114,366 110,534
-------- --------
Income before federal income taxes 8,538 5,933
Federal income tax expense 2,996 1,084
-------- --------

Net income $ 5,542 $ 4,849
======== ========

Net income per share
Basic $ 0.17 $ 0.14
Diluted 0.17 0.14

Weighted average shares outstanding
Basic 33,239 34,536
Diluted 33,375 34,671


CERES GROUP, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

March 31, December 31,
2006 2005
------------ ------------
(Unaudited)
ASSETS
Investments $ 491,217 $ 488,906
Cash and cash equivalents 25,267 26,764
Reinsurance receivable 127,476 131,227
Deferred acquisition costs 77,803 73,955
Value of business acquired 10,752 11,126
Goodwill and licenses 14,097 14,097
Other assets 23,149 24,928
----------- -----------
Total assets $ 769,761 $ 771,003
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Policy liabilities and benefits accrued $ 506,788 $ 508,023
Deferred reinsurance gain 5,147 5,451
Other policyholders' funds 15,856 14,970
Debt 6,250 7,313
Other liabilities 30,570 31,873
----------- -----------
Total liabilities 564,611 567,630
Stockholders' equity 205,150 203,373
----------- -----------
Total liabilities and stockholders'
equity $ 769,761 $ 771,003
=========== ===========


Equity per common share:

After accumulated other comprehensive
income (1) $ 6.17 $ 6.12

Before accumulated other comprehensive
income (1) 6.28 6.12

Book value per share excluding goodwill and
licenses 5.74 5.70
-------------
(1) Accumulated other comprehensive income relates primarily to the
net unrealized gain (loss) on available-for-sale securities.


CERES GROUP, INC. and SUBSIDIARIES
INDUSTRY SEGMENT DATA
Unaudited
(in thousands)

Three Months Ended
March 31,
---------------------
2006 2005
---------- ----------
Medical
Revenues
Net premiums $ 55,827 $ 56,566
Net investment income 878 971
Net realized gains (losses) 3 (81)
Fee and other income 4,075 3,961
--------- ---------
60,783 61,417
--------- ---------
Expenses
Benefits and claims 40,058 38,920
Other operating expenses 17,500 19,415
--------- ---------
57,558 58,335
--------- ---------
Segment profit before federal income taxes $ 3,225 $ 3,082
========= =========

Senior and Other
Revenues
Net premiums $ 55,367 $ 50,070
Net investment income 6,025 5,112
Net realized losses (9) (874)
Fee and other income 552 627
--------- ---------
61,935 54,935
--------- ---------
Expenses
Benefits and claims 41,419 38,486
Other operating expenses 14,797 13,167
--------- ---------
56,216 51,653
--------- ---------
Segment profit before federal income taxes $ 5,719 $ 3,282
========= =========

Corporate and Other
Revenues
Net investment income $ 71 $ -
Net realized gains 115 115
--------- ---------
186 115
--------- ---------

Expenses
Interest expense and financing costs 159 175
Other operating expenses 433 371
--------- ---------
592 546
--------- ---------
Segment loss before federal income taxes $ (406) $ (431)
========= =========

Income before federal income taxes $ 8,538 $ 5,933
========= =========

Medical loss ratio 71.8% 68.8%
Senior loss ratio 74.8% 76.9%
Overall loss ratio 73.3% 72.6%

In connection with Ceres' solicitation of proxies with respect tothe meeting of stockholders to be called with respect to the proposedmerger, Ceres will file with the Securities and Exchange Commission,and will furnish to stockholders of Ceres, a proxy statement.Stockholders are advised to read the proxy statement when it isfinalized and distributed to stockholders because it will containimportant information. Stockholders will be able to obtain afree-of-charge copy of the proxy statement (when available) and otherrelevant documents filed with the SEC from the SEC's website atwww.sec.gov. Stockholders will also be able to obtain a free-of-chargecopy of the proxy statement and other relevant documents (whenavailable) by directing a request by mail or telephone to Ceres Group,Inc., 17800 Royalton Road, Cleveland, OH 44136, Attention: CorporateSecretary, Telephone: 440-572-2400, or from Ceres' website,www.ceresgp.com.

Ceres and certain of its directors, executive officers and othermembers of management and employees may, under the rules of the SEC,be deemed to be "participants" in the solicitation of proxies fromstockholders of Ceres in favor of the proposed merger. Informationregarding the persons who may be considered "participants" in thesolicitation of proxies will be set forth in Ceres' proxy statementwhen it is filed with the SEC. Information regarding certain of thesepersons and their beneficial ownership of Ceres' common stock as ofMarch 27, 2006 is also set forth in the Schedule 14A filed by Ceres onApril 3, 2006 with the SEC.

About Ceres Group

Ceres Group, Inc., through its insurance subsidiaries, provides awide array of health and life insurance products through two primarybusiness segments. Ceres' Medical Segment includes major medicalhealth insurance for individuals, families, associations and smallbusinesses. The Senior Segment includes senior health, life andannuity products for Americans age 55 and over. To help controlmedical costs, Ceres also provides medical cost management services toits insureds. Ceres' nationwide distribution channels includeindependent and career agents, as well as electronic distributionsystems. Ceres is included in the Russell 3000(R) Index. For moreinformation, visit www.ceresgp.com.

This news release contains certain forward-looking statements withrespect to the financial condition, results of operations and businessof the company. It also contains certain forward-looking statementswith respect to the effect of the proposed merger. Forward-lookingstatements are statements other than historical information orstatements of current condition. In light of the risks anduncertainties inherent in all future projections, the inclusion offorward-looking statements herein should not be regarded asrepresentation by the company or any other person that the objectivesor plans of the company will be achieved. Although the companybelieves that the expectations are based on reasonable assumptions, itcan give no assurance that its expectations will be achieved.Forward-looking information is subject to certain risks, trends anduncertainties that could cause actual results to differ materiallyfrom those projected. Many factors could cause actual results todiffer materially from those contemplated by such forward-lookingstatements, including, among others, failure to obtain stockholderapproval or the failure to satisfy other closing conditions, includingregulatory approval, with respect to the merger, expectations of thecompany's operating plans and strategies in general, our expectationsof the performance of our lines of business, failure to accuratelypredict loss ratios, persistency and improvements in our business,business conditions and competition in the healthcare industry, thefailure to successfully implement our 2006 business plan (includingthe company's growth strategy) for the company and its subsidiaries,failure to accurately predict claims liabilities, ability to institutenecessary rate increases, ability to develop, market and administernew, profitable and competitive products, developments in healthcarereform and other regulatory issues (including failure to meetstatutory capital requirements), rising healthcare costs, adverseoutcomes in litigation and related matters, failure to comply withfinancial and other covenants in our loan agreement, and performanceof our reinsurers. This review of important factors should not beconstrued as exhaustive. Investors and others should refer to Ceres'filings with the Securities and Exchange Commission, including itsannual report on Form 10-K for the year ended December 31, 2005, andits quarterly reports on Form 10-Q and other periodic filings, for adescription of the foregoing and other factors. Ceres undertakes noobligation to update forward-looking statements to reflect events orcircumstances after the date hereof or to reflect the occurrence ofunanticipated events.