Underlying earnings before tax at Aegon UK slumped 79% to just £7m in the first three months of the year as lower fund-related charges hit the firm's pensions business.
The insurer says the impact of lower equity and corporate bond markets on its unit-linked pensions prompted the slump in earnings, which stood at £34m in Q1 2008.
Underlying earnings on pensions and asset management alone fell £25m to just £3m.
However, Aegon UK chief executive Otto Thoresen lauded the insurer's "resilience" in posting a sales decline in new life and pensions products of just 6% in Q1, which he says "compares favourably" with its market peers.
Elsewhere, Aegon UK says earnings on life and protection business were down £1m to £7m in Q1 compared with the same period last year.
Distribution activities in Q1 experienced a loss of £3m which it says was primarily as a result of more difficult market conditions for mortgage and investment products.
New life sales, including single and recurring premiums, were down 9% to £265m in Q1 2009, offsetting sales increases in annuities.
However, life sales alone climbed 29%, from £55m in the first three months of 2008 to £71m in Q1 2009.
Aegon says the value of new business increased 30% to £52m "driven by the shift in sales to high-margin areas", such as annuities.
"Aegon UK's new business levels remained resilient during the first three months despite very challenging economic conditions and our performance compares well against that of our competitors," chief executive Otto Thoresen says.
"Aegon is now clearly positioned as one of the key players in the UK life and pensions sector. Our strategy to diversify our business across a broader product range has enabled us to maintain good momentum through difficult markets.
"While customers may be reluctant to make investment and savings decisions due to the prevailing economic conditions, our annuity business and corporate pensions businesses continue to deliver growth."
Total commissions and expenses in the quarter were up 1%, although commissions alone were down. Operating expenses increased by 2% to £100m, Aegon UK says.
Globally, the Aegon group suffered a loss before tax of EUR 22m due primarily to lower equity markets.
Follows McVey's resignation
Schroders and Aviva Investors
LightTower Partners, Seneca Partners and Unicorn AM
Integration with Money Dashboard
View from the front row