Andrew Cave looks at what went wrong for Standard Life and whether there are lessons for Lloyd's

A dozen years ago, anyone enquiring about an endowment mortgage at an independent financial adviser would have been dazzled with a laminated sheet whipped out of the top drawer.

"These are the returns from Britain's top life insurers over the past 25 years", the adviser would say with a well-practised air. "And as you can see, Standard Life has consistently been in the top three."

For house-buyers struggling with an endless array of potential choices, that sales pitch was often enough.

There was a slightly worrying little paragraph at the bottom of the glossy brochure stating that past success was no guarantee of future returns.

But surely that was just safety-first regulatory talk. With a history like that, there was clearly no need to worry.

Or was there? Twelve years on, the statistics tell a sorry story. From boasting gains for investors that were among the best in Britain's life industry, Standard Life's returns are now rather sub-standard.

What went wrong? Years of arrogance and neglect, followed by a huge strategic mistake, which was then compounded by the firm being forced into a regulatory cul-de-sac.

The result was that after stubbornly keeping much more of its with-profits fund invested in shares at a time when the stock market was plummeting, Standard then had to sell when the market was at its weakest.

Consequently it is having to abandon the long-cherished mutual status that helped it out-perform its rivals in the first place.

Staff and investors can be forgiven for thinking that the few thousand pounds they are gaining in windfalls are scant compensation for being locked into an investment that is likely to continue to under-perform.

And those laminated sheets are now nowhere to be found.

What are the lessons for Lloyd's of London? For here is another historic institution whose members cherish mutuality and a long record of survival in choppy financial waters.

Indeed, Lloyd's survived its own Standard Life moment a decade ago, thanks to reconstruction and renewal. More recently, it has weathered the September 11tragedy and last year's record hurricanes.

Yet the fiasco of Kinnect and the recent moves by long-standing Lloyd's managing agents to open up in Bermuda demonstrate that much still needs to be done to ensure that this grand old name is equipped for the future.

New chief executive Richard Ward is all too aware of this.

It is the reason why Lloyd's has gone outside its own boundaries for its top two executives for the first time in its history.

Ward, who started last week, has already dragged one formerly backward-looking commodities market into the 21st century.

He brings independence of mind which should at least allow him to tackle the market's many sacred cows and address the fundamental question of what Lloyd's is for.

For the sake of Lloyd's, he must get it right. Plenty of people in Edinburgh could tell him what might happen if he doesn't.IT

Andrew Cave is the former associate City editor of The Daily Telegraph