Shares in Legal & General (L&G) dropped 11% on Wednesday after the insurer revealed it suffered an operating loss of £189m in 2008.
Figures show the company lost £189m on an IFRS basis last year compared with a profit of £658m in 2007.
As of shortly after midday, shares had fallen more almost five points, or 10.98%, and were trading at just over 38p.
On a European Embedded Value (EEV) basis the company reported an increase in operating profit to £870m from £848m in 2007.
L&G says it will cut its final dividend to 2.05p per share from 4.10p per share to focus on building its capital strength.
It said its losses were caused by the turmoil in the stockmarkets during 2008, but adds its capital position was also impacted by a decision to double its provisions against losses on credit defaults to £1.2bn.
"We took action in 2008 to improve business cashflow and strengthen capital by substantially increasing our credit default reserves, reducing our equity exposure, and managing our cost base," L&G chief executive Tim Breedon says.
"Balance sheet strength remains our priority in 2009 and will be underpinned by further improvement in the cash profile of our businesses and management of costs.
"We will be selective about sales growth and are reducing new business capital strain through product design and pricing action."
Breedon adds L&G's decision to halve its final dividend reflects the current environment, but also illustrates its confidence in its business model and the "underlying strength" of the company.
L&G's UK life and pensions business took a significant hit, falling £291m from a £557 profit in 2007. Elsewhere, the insurer's international life and pensions business made a profit of £63m compared to an £86m profit the previous year.
Its investment management arm fared better than its counterparts however, with profits up £10m last year from £155m in 2007.IFAonline
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