Scottish Mutual believes the abysmal performance of its range of protected funds will continue well into next year.
In a memo obtained by Money Marketing, the life office admits any improvement in the performance of its Controlled Risk and Protected funds before the spring is "remote".
The life office believes a stockmarket correction induced by "millennium nervousness" will keep the cost of options used to protect the funds high.
But experts say even if stockmarkets become more stable next year it could take up to nine months for the cost options to come down.
Its Managed 95 fund dropped 6.5 per cent in the 12 months to October 28 and in July was moved entirely into cash.
Earlier this year, ScotMut circulated a different memo to its salesforce on how to deal with complaints from IFAs and policyholders. It also admits it made "wrong" investment decisions.
Managing director of actuarial consultants Intersolve Mark Barge says: says: "Volatile markets shoot up overnight but take longer to correct. It could take a six to nine month period of less volatility to bring the cost of options down."
Scottish Mutual insists the funds should be judged over the long-term.
Investment development director Mark Colman says: "If volatility calms down there is no reason why prices can't change in a few weeks. We may go back into the markets in a few months."