Ceres Group Announces Settlement of Class Action Litigation.

CLEVELAND -- Ceres Group, Inc. (Nasdaq:CERG) today announced that it has agreed to settle a previously-disclosed California class action lawsuit pending against it and its subsidiaries, United Benefit Life Insurance Company ("UBL") and Central Reserve Life Insurance Company, as well as a related action involving its subsidiary, Provident American Life and Health Insurance Company ("PALHIC"). These suits relate primarily to challenges to premium increases for California holders of major medical policies issued by UBL and PALHIC. UBL terminated all of its policies nationwide as of December 31, 2001, or in limited cases as of February 28, 2002. PALHIC has only 400 active policyholders (none in California) and discontinued new sales activities in 2001. The settlements contemplate payments to class members and others, as well as certain attorneys' fees and costs. The settlements are subject to certain conditions (including court approval with respect to the class action lawsuit) and do not involve any admission of wrongdoing by the company or any subsidiary.

The company estimates that these settlements will result in a charge in the third quarter ending September 30, 2004 of approximately $2.1 million (after-tax), or $0.06 per diluted share. Although the final amount of the settlement payout may vary, the company believes that the ultimate payout will not materially exceed this amount.

The company has previously stated that it expects to achieve net operating income of $0.53 per diluted share for the full year 2004. Net operating income excludes certain items (such as net realized investment gains and the reduction in the deferred tax valuation allowance) that, in the opinion of management, are not indicative of overall operating trends. The company believes that, excluding such items and the charge from these settlements, it will still achieve net operating income of $0.53 per diluted share for 2004.

About Ceres Group

Ceres Group, Inc., through its insurance subsidiaries, provides a wide array of health and life insurance products through two primary business segments. Ceres' Medical Segment includes major medical health insurance for individuals, families, associations and small businesses. The Senior Segment includes senior health, life and annuity products for Americans age 55 and over. To help control medical costs, Ceres also provides medical cost management services to its insureds. Ceres' nationwide distribution channels include independent agents and its electronic distribution system. Ceres is included in the Russell 3000(R) Index. For more information, visit www.ceresgp.com.

This news release contains certain forward-looking statements with respect to the financial condition, results of operations and business of the company. Forward-looking statements are statements other than historical information or statements of current condition and, in general, are those accompanied by words such as "believe," "expect," "estimate," and similar expressions. In light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements herein should not be regarded as representation by the company or any other person that the objectives or plans of the company will be achieved. Many factors could cause actual results to differ materially from those contemplated by such forward-looking statements, including, among others, failure to accurately predict claims liabilities, rising healthcare costs, business conditions and competition in the healthcare industry, developments in healthcare reform and other regulatory issues (including failure to meet statutory capital requirements), adverse outcomes in litigation and related matters, ability to develop and administer competitive products, performance of our reinsurers and failure to comply with financial and other covenants in our loan agreements, and the failure to successfully implement the business plans for the company and its subsidiaries. This review of important factors should not be construed as exhaustive. Investors and others should refer to Ceres' filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2003, and its quarterly reports on Form 10-Q and other periodic filings, for a description of the foregoing and other factors. Ceres undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.