In its budget in March, the British government said it would stop making annuity purchases compulsory for many pensioners. The decision effectively ends a captive market for Britain's life companies selling annuities, which provide an income for life in exchange for a retiree's pension pot.

Partnership sells annuities to pensioners who are heavy smokers or suffer medical conditions such as diabetes or heart disease, paying out higher rates because they are unlikely to live as long as healthier retirees.

Its shares were down almost 6 percent at 87 pence in early trading on Thursday.

The company had already warned that the reforms would cause significant disruption and on Thursday put out an accelerated trading statement because of "the difficulty the uncertain environment causes for the market in accurately forecasting sales".

Partnership said the ongoing upheaval had resulted in individual retirement annuity sales of 69 million pounds in the three months to Sept. 30, out of total sales of 89 million pounds. That compares with individual annuities of 135 million pounds and total sales of 155 million pounds a year earlier.

Quotes, a closely watched indicator of future sales, remained 50 percent below the level prior to the March announcement and conversion rates were also down versus pre-budget averages, it added.

"At this stage there is no obvious catalyst to change this behaviour prior to the new regulations being implemented and it is possible that deferrals could increase further as we approach April 2015," Chief Executive Steve Groves said.

The company has been trying to diversify to offset the decline and has a growing but "lumpy" pipeline of defined benefit transactions. It is also seeking overseas expansion.

"Although the timing of any international expansion remains uncertain, our discussions with potential partners to deploy Partnership's unique Intellectual Property in the United States are progressing well," Groves said.

"I expect market disruption and uncertainty to prevail in the short term, but I remain confident that by leveraging our core competences, we will achieve our long term goal of delivering a diversified, growth business over time."

(Reporting by Clare Hutchison; Editing by Vincent Baby)

By Clare Hutchison