Friends Provident today reported a 20 per cent drop in profits for the first half of the year.

Underlying profit before tax fell £53 million to £211 million – but the firm has reiterated it will not need to raise extra capital.

Under different IFRS accounting measures, profits dropped from £111 million last year to £13 million – following a £70 million hit it the annuity business due to recent capital market turbulence as corporate bond yields widened.

Sale for the insurer were down six per cent, with new business in the UK falling 21 per cent

Sir Adrian Montague, Friends Provident chairman, said the group was on track with its new strategy but there was “still a lot to do”.

“The strong headway made in implementing our new strategy, coupled with other timely initiatives taken to reduce our exposure to financial markets, has enabled the company to weather the subsequent sharp economic downturn more favourably than otherwise would have been the case,” he said.

“Our business has no need to raise capital to fund growth, and our revised dividend policy remains sustainable.”

The firm also warned there was a risk a prolonged economic downturn will cut the insurer’s income.

At 9:33 BST the Friends Provident share price fell 3.82 per cent to 88.20p.