The Chancellor George Osborne and the 2014 Budget
The Chancellor George Osborne holds his ministerial red box up to the press ahead of the 2014 Budget announcementReuters

Insurance giant Friends Life saw its first half year operating profits before tax drop by £12m compared to a year ago in the wake of the UK government's radical retirement reforms.

The FTSE 100 constituent revealed in its half year results that its operating profits before tax fell by 7% from 171m ($288m, €215m) in 2013 to £159m in 2014.

The firm explained that the fall had been partially offset by higher returns on shareholder assets as long-term expected rates of return improve.

"It's clear that our industry has seen a large amount of change in the first six months of 2014," said Andy Briggs, group chief executive of Friends Life.

"The scale of our business with more than two million pension customers representing one in seven defined contribution savers, as well as our focus on customer needs, means we are well placed to win in the retirement and savings market.

"I remain confident that we can fully benefit from the opportunities presented to us and that we have the right people to deliver our plans to drive growth throughout the business."

The company also revealed in its report that its value of new business dropped from £85m to £65m over the year.

The results come after the Chancellor George Osborne unveiled a raft of radical pension reforms as part of his 2014 Budget.

Among the Conservative MP's measures was the legislation to enable retirees to withdraw their pension pot without having to purchase a costly annuity.

But a report from professional services firm Towers Watson retirement market will triple to £50bn in 2023 despite the changes.

However, Friends Life said new annuity applications are now beginning to fall, albeit not yet to the level of long-term expectations.

The firm said it expects applications in the second half of 2014 to fall further towards its long-term expectation of 20% lower than pre-Budget levels for Guaranteed Annuity Options business and 50% - 70% lower than pre-Budget levels for non-GAO business.