The insurer, which is owned by Aviva, saw a 1.4 per cent drop in sales at its UK life insurance and pensions business to £8.63bn in the first nine months of the year, compared to the same period last year.

But the group is preparing for up to a five per cent drop in sales, as the looming recession bites.

"We have seen no evidence of people turning their backs on savings or protection," said Mark Hodges, chief executive of York-based Norwich Union Life .

However, he said based on market predictions, a slowdown in sales may increase "over the next three to six months as some of the impact of the financial crisis starts to hit the wider economy."

But he said even five per cent sales fall would be bearable.

"Even at that level it's not catastrophic," he said.

"I think we may see a slowdown in sales but equally if interest rates go down that may make investing in stock markets and property more attractive."

Within the UK business, investment sales fell 43 per cent to £1.24bn, which Aviva said reflected a market "that is at its weakest for nearly two decades" and the struggling commercial property sector.

Protection sales fell 10 per cent – due to the slowdown in payment protection and mortgage-related business.

Norwich Union Life, which employs about 3,500 at its York headquarters, said it has heard from increasing numbers of policy holders concerned about the value of their investment.

"We have experienced an increase in the number and frequency of customer calls inquiring on the value of their policies, as consumer confidence is impacted by market uncertainty," the group said.

However, Mr Hodges insisted it was not seeing a corresponding increase in withdrawals from life and pensions portfolios.

"Given everything going on what we have not seen is any panic among our customer base," said Mr Hodges.

Life insurers' shares have fallen steeply this month amid mounting concerns that falling equity and bond prices could dent their capital reserves.

Insurers are obliged to hold enough spare capital to meet their obligations to customers, plus a further buffer to absorb shocks.

Aviva had a £1.9bn capital surplus as of September 30, but by October this was down to £1.3bn.

It estimated that a further 20 per cent fall in the UK stock markets would drive its capital cushion down by another £400,000.

Despite this the group said it does not need to go cap-in-hand to the Government for assistance similar to the banking bailout earlier this month.

"We're pretty confident we don't need to raise any further capital," said Aviva chief executive Andrew Moss.

"I can confirm we have had no discussion with the Government on any capital support from the Government."

Globally, Aviva's life and pension sales were up 12 per cent to £25.67bn, beating analysts' forecasts of £24.86bn.

Aviva said Europe and the United States helped to offset the weak UK performance, with increases of 16 and 39 per cent respectively.

Shares in Aviva soared 13 per cent at one point yesterday on the reassurance and strong results. They closed up 13.5p at 270.6p, a rise of 5.6 per cent.

"These are unprecedented times," said Mr Moss.

"Our share price has been affected by the huge uncertainty in financial markets, but people around the world are still saving and buying insurance from brands they trust, like Aviva."

Analysts said the results revealed yesterday should reassure the market.

"The fact that total sales were up in the current environment highlights the strength of Aviva's product and geographic diversification," said analysts at brokerage Charles Stanley.

Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers said: "Aviva's comments should generate some additional investor confidence, whilst a number of industry analysts appear to believe that the company could raise further capital if required."


Payout may be renegotiated

Aviva confirmed it is considering renegotiating a £1bn payout to with-profits policyholders, announced during the summer.

Plunging financial markets have eroded the value of the capital underpinning the payment.

Under the terms of the agreement eligible policyholders would not receive the money until mid-2009.

The group stressed any change would be made in consultation with Clare Spottiswoode, who represents the policyholders.

Norwich Union Life chief executive Mark Hodges said: "If in January or February markets were still where they are today then it would be absolutely right to go back and re-look at the split of value between customers and shareholders.

"But the problem is no-one knows where that market will be."