TD Bank 2012 Annual Report Download - page 30

TD BANK GROUP ANNUAL REPORT 2012 MANAGEMENT’S DISCUSSION AND ANALYSIS28
BUSINESS HIGHLIGHTS
• Both Wealth and Insurance businesses had record earnings
in 2012 with net income of $601 million for Wealth and
$557 million for Insurance.
• The Canadian direct investing business continued to lead the
market in both share of assets and trades, in addition to
increasing share of trades over the same period last year.
Our U.K. operations maintained the number one market
position, as ranked by trades per day.
• Our advice business in Canada continued to gain market share
as measured by assets, despite volatile markets.
• Both our Direct Investing and Full Service brokerage busi-
nesses have improved their rankings in the J.D. Power and
Associates customer satisfaction surveys.
• TDAM, the manager of TD Mutual Funds, was once again
recognized at the Canadian Lipper Fund Awards with wins in
multiple fund classifications across each of the one, five and
ten-year performance categories and a repeat winner in the
Fixed Income classification.
• Gross originated insurance premiums grew 7%. TD Property
and Casualty Insurance grew affinity market premiums by 9%
and retained the #1 direct writer position in home and auto
and #2 in personal lines position.
• TD Insurance invested in customer experience through the
addition of client-facing roles, increased training and stream-
lined processes resulting in doubling of customer satisfaction
scores year over year.
• Closed the MBNA Canada acquisition which has related insur-
ance offerings that have been consolidated with TD Insurance.
• Processed over 282,000 claims across Canada, helping custom-
ers and their families in their times of need.
CHALLENGES IN 2012
• In our Wealth business, Direct Investing trading volumes were
impacted throughout the year by the continued uncertainty in
the U.S. and European economic and political environments,
which led to investor fatigue and depressed trading volumes.
• Low interest rate environment continued to limit our ability
to grow revenue on loans and deposits.
• The Property and Casualty insurance business experienced
unfavourable prior years claims development in the Ontario
auto insurance market, as well as challenges from unpredict-
able weather conditions.
• Lower credit volumes drove reduced demand for the associ-
ated authorized insurance products in the Life and Health
insurance business.
INDUSTRY PROFILE
TD Wealth’s business operates in three geographic regions: Canada,
the U.S., and Europe. In Canada, the industry is extremely competitive
consisting of major banks, large insurance companies, and monoline
wealth management organizations (including mutual fund companies
and private wealth managers, asset managers and financial planners).
Given the level of competition in Canada, TD’s success lies in our abil-
ity to differentiate on client experience across all of our businesses and
channels by providing the right products, services, tools and solutions
to serve our clients’ needs.
In the U.S., the wealth management industry is large but competi-
tion is more fragmented, consisting of banks, insurance companies,
independent mutual fund companies, discount brokers, full service
brokers, and independent asset management companies. In our
Maine-to-Florida footprint, the Bank competes against both national
and regional banks and non-bank wealth organizations.
TD Ameritrade, in which TD has a substantial investment, competes
most directly with other direct investment firms. TD Ameritrade remains a
leader in this market by continuing to deliver world-class direct investing
capabilities to our clients, including investor tools, services and education.
In Europe, the industry is led by strong regional players with little
pan-European presence or brand. In the U.K., TD competes most
directly with other direct investment firms and institutional services
firms. In Europe, TD competes by providing focused multi-currency and
multi-exchange online direct investing services for retail investors.
TD Insurance operates in both the Canadian property and casualty
insurance industry and the life and health insurance industry. The
property and casualty industry is a fragmented and competitive market
where TD competes against other personal lines insurers and TD is the
leading player in the affinity market. The life and health insurance
industry in Canada and the reinsurance market internationally are
more consolidated with a few large players. While the predominant
distribution channel is the independent intermediary, TD is also
focused on offering insurance solutions to TD customers through
direct distribution channels in this market.
OVERALL BUSINESS STRATEGY
Wealth
• Global Direct Investing builds on existing market leadership positions
by offering best-in-class capabilities, tools, service and investor
education, and by extending our comfort and convenience brand
with continued investment in intuitive functionality.
• The North American Advice-based business continues to grow by
enhancing the overall client experience and by providing comprehen-
sive investment and wealth planning services and solutions to help
retirees and pre-retirees protect, grow and transition their wealth.
• The Asset Management business deepens channel penetration,
broadens institutional relationships, and expands international
equity capabilities.
Insurance
• Protect Canadians by offering insurance products and advice that is
easy to access from a trusted brand.
• Focus on the client experience by differentiating on service to drive
customer satisfaction, deepen customer relationships and increase
retention.
• Strengthen our direct distribution advantage by increasing our
channel capabilities and investments.
•
Maintain our conservative risk approach to build long term sustainable
earnings and growth.
(millions of Canadian dollars, except as noted) 2012 2011
Net interest income $ 583 $ 542
Insurance revenue, net of claims and related expenses2 1,113 1,167
Income from financial instruments designated
at fair value through profit or loss 5 (2)
Non-interest income – other 2,318 2,333
Total revenue 4,019 4,040
Non-interest expenses 2,600 2,616
Net income 1,158 1,107
Wealth 601 566
Insurance 557 541
TD Ameritrade 209 207
Total Wealth and Insurance $ 1,367 $ 1,314
Selected volumes and ratios
Assets under administration – Wealth
(billions of Canadian dollars)3 $ 258 $ 237
Assets under management – Wealth
(billions of Canadian dollars) 207 189
Gross originated insurance premiums 3,572 3,326
Return on common equity4 20.7% 25.3%
Efficiency ratio 64.7% 64.8%
Average number of full-time equivalent staff 11,930 11,984
1
Effective November 1, 2011, the Insurance business was transferred from
Canadian
Personal and Commercial Banking to Wealth and Insurance. The 2011
results have been restated accordingly.
2 Insurance revenue, net of claims and related expenses is included in the non-
interest income line on the Bank’s Consolidated Income Statement. For the year
ended October 31, 2012, the claims and related expenses were $2,424 million
(October 31, 2011 – $2,178 million).
3 The prior period results for Wealth assets under administration were restated to
conform with the presentation adopted in the current year.
4 Effective the first quarter of 2012, the Bank revised its methodology for allocating
capital to its business segments to align with the future common equity capital
requirements under Basel III at a 7% Common Equity Tier 1 ratio. The return
measures for business segments will now be return on common equity rather than
return on invested capital. These changes have been applied prospectively. Return
on invested capital, which was used as the return measure in prior periods, has not
been restated to return on common equity.
WEALTH AND INSURANCE1
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