An attempt to woo two distributors in 2008 came back to haunt Standard Life on Thursday, as it unveiled a 20 per cent fall in life and pensions new business sales for the first quarter of 2009.

The insurer had issued an investment bond in the first quarter of last year that, although attractive to savers, was not very profitable. The bond was sold in bulk through two unnamed UK distributors that Standard Life wanted to cultivate.

The decision not to renew that low-margin business was one of the big reasons that its life and pensions new business sales — a measure that reflects initial and future payments on newly-signed contracts — fell from £4.5bn in the first quarter of 2008 to £3.6bn in the first quarter of this year.

David Nish, finance director, said the decline also reflected the equity bear market, which eroded asset management fees and the value of pensions being transferred into the group.

The new business weakness was also partly the result of the uncertainty that temporarily surrounded a supposedly-safe cash fund that required a £100m top-up after it fell in value.

Standard Life said market conditions would continue to be challenging. Mr Nish said the state of financial markets would continue to shape its performance, but added that there had been good sales activity in the first three weeks of April.

The solvency of insurers is being watched closely amid the current market volatility. Standard Life’s capital buffer at March 31 remained relatively steady at £3.2bn, down from £3.3bn at the end of 2008.

Standard Life shares rose 1p to 193.7p in early trading.

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