STANDARD Life shareholders are hoping to be rewarded with a special dividend on the back of bumper profits and windfall gains that have significantly bolstered its balance sheet.
Analysts at Exane BNP Paribas believe a one-off payout in the order of 30p a share may be announced when the Edinburgh insurance giant unveils full-year results this week.
The city has pencilled in consensus forecasts for group operating profits of £853 million, a 57 per cent increase.
As well as strong business growth, analysts argue a recent £500m bond issue in the UK, the sale of Canadian properties, a renegotiation of a re-insurance arrangement worth £140m and the £96m proceeds of an indemnity insurance claim have left the company with significant leeway for a one-off return to shareholders.
Exane believes the group has more capital than it needs and, with low interest rates, a return to shareholders would make sense.
“The big question on Thursday is what will they do with the money, and we believe they could announce a special dividend,” said analyst Andy Hughes.
Shareholders are already expected to benefit from a forecast dividend rise of 6 per cent to 14.69p a share.
Although shares in the company have risen by more than 50 per cent in the past year, Hughes believes they are still significantly undervalued and has set a target price of 395p.
Exane believes a key driver for strong profit growth will be the contribution from Standard Life Investments (SLI), which it believes has been underestimated by the market. It expects SLI earnings of £300m in 2014 and £384m in 2015 – triple the 2011 level.
It also said Standard Life had benefited from being “correctly positioned” for the changes brought about by the Retail Distribution Review.
Analysts at Panmure Gordon have also been positive on the stock in recent days and are continuing to rate the shares as a buy.
“Despite the strong share price performance in 2012, we believe the valuation remains attractive and that there is still further upside,” said analyst Barrie Cornes.
Group assets under administration are forecast to have risen by 9 per cent to £216 billion.
Thursday will also see Aviva’s new chief executive Mark Wilson unveil his first set of full-year results just two months after joining to replace predecessor Andrew Moss, who quit following a shareholder rebellion over pay and performance last May.
Wilson has already started to make his mark at the group, overhauling the management team in a shake-up that claimed the scalp of ex-Standard Life executive Trevor Matthews, who is Aviva’s executive director of developed markets.
Aviva has undergone a raft of changes under a transformation plan, including swingeing cost-cutting and a £1.1bn deal at the end of last year to quit the US life and pensions market by offloading its American arm.
Forecasts predict that full- year operating profits will fall 13 per cent to £2bn, excluding its recently offloaded stake in Amsterdam-listed Delta Lloyd.
The City will also be watching the group’s dividend payment closely, after rival RSA shocked the market with an unexpected hefty cut in its shareholder payout.
Fellow insurer Legal & General also reports full-year figures on Wednesday. The results are expected to have been boosted by the launch of auto-enrolment pension schemes for large companies.