D I A F T
Guidelines for Allied Dwsbar : July 1987
General
I. The Guidelines fat Allied Dunbar reflect the expectation that the
company should be able to achieve sustained rapid rates of growth in
turnover and profits through Wilding on the strength& inherent in:-
A cust*zer base of I million relatively affluent policyholders
and4nv&stors.
(b) A large direct salftsfocca and a good relationship with 3,000
independent life assurance and investment brokers.
W A management to= experienced and Lmovative In Ufa, pensions,
retail funds and related fields.
M A highly efficient adaLnistrative tan, experienced In thesa'
fields and capable of Operating sophisticated computer systems
and controls.
Tinancial Guidelines
2. Istaras : Allied Dunbar should aim for the gnmu-1 increase in the
value of 34-T Industries' attributable share of the assessed value of
the business together with net dividends paid to B.A.T Industries to
be 25Z of the opening value of the attributabl* assessed value. B.A.T
Industries' attributable share should reflect this not liability in
respect of outstanding shares and share options.
Additionally, Allied Dunbar should seek to 1;ncreasa the Financial
Surplus from 167m, in 1987 to W7u In 1992, which represents a pre-tax
ratura on I.L.T ludustries' astimted book value rising frou 19.9% La
L987 to 35.7% in 1992.
3. Cross Initial Comissious : Allied Dunbar should aim to achieve
real growth In gross initial commissions of at least 10% P.&.
4.- Dividends : Allied Dunbar should seek to incrwwe the divide" per
share by at least 10Z p.a. in real term. On this basis *ad assming
I.A.T Industries acquires shares promptly after issue. the ninimm
dividends required frou Allied Dunbar &re:-
La 1987 1958 1989 1990 1991 1992
Not Dividend 35.0 40.4 46.8 54.1 62.5 72.2
Tax Credit (ACT) 12.9 14.9 17.3 20.0 23.1 26.7
47.9 59.3 64.1 7A.L $3.6 98.9
Specific Priorities
5. Tha first priority is to retain the comitwat and motivation of the M;
salesfarce and sales managemmmt in a period when it say be necessary
to adjust products, calling methods and connission arraNaments to
seat the requirement of new legislation and regulatory arrangements.
This will be borne in mind in the ccosimation of the options for
providing a now incentive *cheme to replace the existing share option
scheme, which lapses in 1990.
LA;
BAT Industries document for Province Of British Columbia 23 April 1999

6. There will need to be continuing emphasis an Improving salesf orca
productivity through attracting more customers and by providing
existing customers with a wider range of attractive policies.
A Uy element of this should be to consider the potential for
extending the customer base to compete more strongly In the sectors of
the market currently sarmd by Industrial Life companies.
7. There should be continuing emphasis an ensuring chat the qualicy and
capacity of the information systems used within Allied Dunbar La nab
that them can not only support the azisting business but can also be
used as a positive factor In promoting new activities and services.
The plans for Allied Dunbar should Include adequate provision for the
necessary Investments both In the system and in the management
resource required for their operation and development.
S. Allied Dunbar should continue to consider, with Eagle star, the extent
to which cross-s*lLizg of Eagle Star Life and General Insurance
products can be made attractive to the two companies and to Individual
salesman.
9. There should be continuing emphasis on the need to achieve above
average Investment performance. Criteria should be developed for
measuring this performance, which should be monitored on a continuing
basis relative to key comparator companies.
10. There should be further consideration of options for anbancing the
existing business bass Including:-
(a) Strengthening the branding of tba names Allied Dunbar and the
Financial Planning Service.
(b) Ra"se*sLng opportunities In the Broker market.
(c) Developing a segmented salssforce aimed at different customer
groups.
(d) Developing an International salesforce.
(a) Developing I tviuming I arrangements with other financial service
institutions similar to those already establish" with Estate
Agents.
11. Allied Duz;bar should also consider the possibilities for further
extending Its activities in financial services through acquisition.
It assessing tbase possibilities, key criteria to be met will be that
the acquLsicioa should be in an activity where the aidsting strength*
and expertise of Allied Dunbar can be applied to enhance the value of
the company acquired and that It should enable Allied Dunbar to
establish a strong competitive position within the relevant market
sector. Although It would be preferable for an acquisition to be r%j
funded from Allied Dunbars owa resources, possibilities of a size CD
which eight need to be funded, at least In part, by B.A.T Industries
should also be considered.
IS/DJA
23rd July 1967
BAT Industries document for Province of British Columbia 23 April 1999