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Investment Management (including business investments)

Profile
Calliden maintained its conservative investment strategy during 2007 with the focus on protecting the capital base whilst the general insurance business was developing.
Investments held as part of the Australian Unity general insurance acquisition are currently managed by Australian Unity Investments under an Investment Management
Agreement signed following the acquisition. All remaining investments of Calliden are managed internally.

Calliden currently has investments in fixed interest, Australian equities, and unit trusts managed by Australian Unity Investments, which include the Wholesale Property Income Fund, the Healthcare Property Trust, and the Mortgage Income Trust. Calliden regularly reviews this asset allocation to ensure that the investment risk of Calliden is appropriate in context with the other risks of the business.

Calliden continues to maintain strict credit guidelines governing the risks associated with fixed interest exposures. These limit the maximum exposure to any individual entity or borrower. All fixed interest investments of Calliden are rated A3/BBB (S&P) or better, with the majority of fixed interest investments rated A1/AA or better.

We have reviewed Calliden’s asset allocation guidelines, resulting in the rebalancing of asset allocations in the second half of 2007. This led to Calliden decreasing its exposure to equities including the sale of all US equity exposures, nonetheless, the equity investments of Calliden remain at a higher level than they were prior to the acquisition.

Calliden continued to increase its investment in joint ventures during 2007, with investments in joint ventures increasing from $1.7 million to $11.6 million during the year.

Total cash and investments of Calliden including joint ventures stood at $165m as at the 31 December 2007.

Outlook
Calliden will continue to review its Investment Strategy and asset allocation on a regular basis, and will continually rebalance asset allocation as it deems appropriate. The focus of Calliden’s Investment Strategy will be to maintain a relatively defensive investment portfolio that provides support for the continuing growth of the general insurance business.