Investments

The Company's investment policy is to balance the portfolio duration to achieve investment returns consistent with the preservation of capital and maintenance of liquidity adequate to meet payment of policy benefits and claims. The Company invests in assets permitted under the insurance laws of the various states in which it operates. Such laws generally prescribe the nature, quality of and limitations on various types of investments that may be made. The Company currently engages the services of three investment advisors under the direction of the management of the Insurance Subsidiaries and in accordance with guidelines adopted by their respective Boards of Directors. Conning Asset Management and Asset Allocation and Management Company manage the Company's fixed maturity portfolio in the United States and Elliot and Page manages the Canadian fixed maturity portfolio. The Company's policy is not to invest in derivative programs or other hybrid securities, except for GNMA's, FNMA's and investment grade corporate collateralized mortgage obligations. It invests primarily in fixed maturity securities of the U.S. Government and its agencies and in corporate fixed maturity securities with investment grade ratings of "Baa3" (Moody's), "BBB" (Standard & Poor's) or higher. However, the Company does own some investments that are rated "BB" or below (together 2.9% and 1.1% of total fixed maturities as of December 31, 2000 and 1999, respectively). Fixed maturities with a carrying value of $0.7 million were non-income producing for the year ended December 31, 2000. During the years ended December 31, 2000, and 1999 the Company wrote down the value of certain fixed maturity securities by $0.5 million and $0.6 million, respectively, which represents management's estimate of other than temporary declines in value and was included in net realized gains (losses) on investments in the accompanying consolidated statement of operations.