L&G poised to hand back £1bn

Legal & General will unveil a bumper £1bn return of cash to shareholders this week as part of a wider capital restructuring of the insurance company.

Tim Breedon, the chief executive of L&G, will discuss details of the return at a meeting with investors and analysts on Wednesday, although it is less likely he will commit to a specific method of delivering the cash. The company could return cash through a share buyback or a special dividend.

Mr Breedon took the helm at L&G at the start of the year and made the insurer's capital structure one of his key focal points. The company overhauled its capital structure a decade ago to allow surplus cash to be distributed to shareholders but recent changes to the financial and regulatory environment have triggered a review of that structure.

Analysts have speculated that the return could be as high as £1.5bn though that looks unlikely as L&G is thought to be keen to maintain a strong cash position to fund expansion. It has grown over the past decade by developing its product range in the UK mass market rather than spreading its wings internationally.

L&G, Britain's third-largest insurer, said in October that revenue in the first nine months of the year had risen 36 per cent as a result of a resurgent savings market. However, competition in the bulk-purchase annuity market has been heating up and investors are eager to determine whether margins have suffered as a result of L&G cutting prices to maintain its market share.