Thousands of savers will see their payouts cut, after life assurer Friends Provident announced bonus reductions despite achieving higher profits.

The firm said the cuts, effective as of Wednesday, would see "payouts on maturing polices being reduced by an average approaching 6%".

The move will affect most of the 750,000 holders of with-profits policies, a Friends Provident spokesman told the BBC.

The firm blamed the decision on the recent stock market slide.

Rival assurer Norwich Union also blamed the poor performance of shares in a decision last week to cut bonuses to many of its policyholders.

Bond potential

Friends Provident's announcement came as it announced operating profits of �161m for the first six months of the year, 29% higher than a year before.

Earnings were backed by a 17% rise, to �845m, in the value of life and pension policies sold.

The firm also took over the asset management business of Royal & Sun Alliance, doubling to �66bn the level of funds Friends Provident oversees.

With stock markets volatile, Friends Provident said it saw particular scope in developing its bond investment team.

Financial position

But the share slide had been insufficient to trouble the firm's underlying financial health, chairman David Newbigging said.

This month's market falls raised fears that insurers would need to sell shares to meet funding guidelines, and might have insufficient funds to pay out for claims.

Mr Newbigging said: "Whilst stock markets have been exceptionally volatile over the past month, our financial position is strong."

The statement further reassured analysts at ABN Amro.

"This once again confirms our belief that solvency is not a real concern for the major listed life companies," an ABN Amro research note said.

And Wednesday's data proved sufficient to prompt French bank Cheuvreux to upgrade its recommendation on Friends Provident stock to "outperform" from "underperform".

The shares stood 7p, or 5.3%, higher at 140p in afternoon trade.