Standard Life's Solvency II ratio dropped 8 percentage points to 154% in the first half of the year, as financial market volatility and the costs of acquiring a 9% stake in Indian life insurer HDFC took their toll.
The result was offset by a methodology change that enabled the group to recognise £200m ($259m) of capital stuck in its principal insurance entity, Standard Life Assurance Limited.
The capital surplus at legal entities that is not recognised at the group level amounted to £800m at the end of June. A spokesperson said the insurer is continually seeking opportunities to enhance its group capital position, but noted there is no certainty about frequency or timing of these actions.
In the half-year report, Standard Life published its Solvency II ratio from an investor's perspective, which came in at 200%, down from 222% at the end of the year.
This measure assumes capital across the group is fully fungible and ignores the capital requirements arising from with-profits business and its pension fund.
Standard Life went to great lengths to emphasise how insensitive the Solvency II capital position is to market volatility.
It claimed that its capital surplus of £2.2bn would change by £0.1bn or less following a 20% variation in equity prices, a 100-basis point change in interest rates or 50-basis point change in credit spreads.
Reflecting the increasing focus on liquidity risk management, the insurer announced that it extended the maturity date of a £400m syndicated revolving credit facility by one year to 2021. This facility, which is part of the insurer's contingency funding plans, is currently undrawn.
According to the report, Standard Life held £845m in cash and liquid resources at the end of June, down from £1.03bn at 2015 year-end.
As far as risks are concerned, the insurer highlighted regulatory risk as an area of concern for the business going forward.
Chief risk officer Raj Singh warned it "may be necessary to compensate customers", following the sample-based Financial Conduct Authority's review of non-advised annuity sales. "This could have an adverse effect on our profitability and/or financial position," he added.
Rising credit risk, which was apparent in the increasing number of rating downgrades in the first half of the year, may also have an adverse impact in the future.
"During this time [H1], our governance processes in relation to investment mandates have operated effectively and there has been no significant adverse impact of downgrades on the business," Singh said, before noting that credit risk is expected to remain at an elevated level.