The size of the task facing the new boss of Friends Provident was laid bare today when the insurer unveiled a slump in sales.

Trevor Matthews arrived last July from rival Standard Life to a company enduring probably the rockiest year in its history.

Over the course of 2008, it fended off a takeover bid from JC Flowers, botched a merger with Resolution Life, lost its top two executives and embarked on a strategic review.

The uncertainty took its toll, with private savers and large institutions taking their money elsewhere.

Sales in the UK sank 27% to £549 million, partly a result of the company pulling product lines. Across the group, sales fell 11% to just over £1 billion.

Matthews, an upbeat Australian who was well-regarded at Standard Life, pointed to a much better performance in the last quarter as evidence that a turnaround is under way. Sales in the last three months were down 4%.

Matthews replaced Philip Moore, who left after the failed deal with Resolution. Finance director Jim Smart also departed in the summer, forcing chairman Sir Adrian Montague to begin an ­overhaul of the company.

He put several businesses, including consumer finance arm Lombard, up for sale. Matthews has since decided to keep this outfit, while a sale of Friends' 52% stake in F&C Asset Management is supposedly still continuing.

Friends has axed about 10% of its staff this year — 425 people — as it moves to cut costs by £40 million.

Its excess capital — a measure of its financial strength — is little changed at £850 million. This proves, according to the chief executive, that the company is “defensively positioned” and could withstand any further shake-out in equity markets.

Matthews said: “Friends Provident is in good shape despite the turmoil in financial markets and the uncertain economic environment. We are a boring life and pensions company, which is not a bad thing to be at this time.”

Some City analysts argue Friends was wrong to reject a 150p-a-share, £3.5 billion offer from private-equity house JC Flowers. The shares today added 4p to 77.4p, leaving the company valued at £1.8 billion. Friends points out that Flowers never launched a formal bid.

Investors received a reduced dividend last year of 8p a share — this year is unlikely to be much higher as Friends seeks to preserve capital.

Matthews said the insurer, which will report profits in March, had succeeded in getting back on to the recommended lists of the top financial advisers.

“We are now being invited to pitch for new schemes with almost all of our key target intermediaries,” he said. Friends won 26 pension mandates in the fourth quarter. For savers in Friends with-profits schemes, the performance has been weak with bonus rates cut.

Matthews said these savers had done better than they would have if exposed to the full force of the stock market, but accepted his fund managers could do better.

The international arm is doing well — sales were up 19% to £456 million.

Friends, founded in 1832 to ­alleviate the hardship of Quaker ­families, ­abandoned its mutual status in 2001.