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TD advances in wealth management and insurance

By Aurélia Morvan | December 21 2020 03:30PM

The Toronto-Dominion Bank (TD) reported net income of $5.1 billion in fourth quarter 2020. This result equals growth of 80.1% or $2.3 billion versus Q4 2019, when the institution reported net income of $2.9 billion. “The increase reflects the net gain on sale of the Bank’s investment in TD Ameritrade and lower insurance claims, partially offset by higher non-interest expenses,” TD explains.    

For the full year 2020, TD reported net income of $11.9 billion, compared with $11.7 billion in 2019, equal to growth of 1.8% or $209 million. 

Insurance and wealth management gain ground 

For its Canadian retail division alone, which includes TD's life and P&C insurance operations, the company reported net income of $6 billion in 2020, compared with $6.9 billion in 2019. The decline amounts to 12.2% or $837 million. 

“The decrease in earnings reflects higher PCL (provision for credit losses) and higher insurance claims, partially offset by revenue growth and higher non-interest expenses in the prior year related to the agreement with Air Canada and the acquisition of Greystone,” TD states. 

Looking at the three components of the Canadian retail industry, insurance and wealth management grew in 2020 while personal and commercial banking faltered: 

  • Canadian Personal and Commercial Banking: Net revenue of $4 billion in 2020 versus $5.1 billion in 2019, down 21.8% or $1.1 billion. 
  • Canadian Wealth Management: Net revenue of $1.3 billion in 2020 versus $1.1 billion in 2019, up 18.2% or $207 million. 
  • Insurance in Canada: Net revenue of $683 million in 2020 versus $610 million in 2019, up 12% or $73 million. In the fourth quarter alone, this subsector reported net revenue of $179 million, up 30.7% or $42 million from the $137 million reported in Q4 of 2019. 

Gross premiums rising 

Gross insurance premiums were $1.3 billion in the fourth quarter of 2020, up from $1.2 billion in the fourth quarter of 2019. The corresponding increase is 4.6% or $57 million. 

For 2020 as a whole, gross revenue was $4.8 billion, compared with $4.5 billion in 2019. This represents an increase of 7.1% or $319 million. 

Expenses rise in 2020 

Insurance indemnities and related expenses totalled $2.9 billion for 2020 overall, compared with $2.8 billion in 2019. The figure is 3.6% or $99 million higher. “The increase reflects the impact of business growth, an increase in certain current year claims reserves, less favourable prior years’ claims development and more severe weather-related events, partially offset by lower current year claims,” TD explains.    

In Q4 2020 alone, insurance claims and related expenses were $630 million, versus $705 million in the fourth quarter of 2019. This decrease of 10.6% or $75 million “reflects lower current accident year claims, no severe weather-related events and favourable prior years’ claims development,” TD says.  

However, this was “partially offset by an increase in certain current year claims reserves as well as an increase in the fair value of investments supporting claims liabilities which resulted in a similar increase to non-interest income.” 

Increase in insurance income 

Non-interest income was $1.1 billion in Q4 2020, up 0.5% or $6 million from fourth quarter 2019. For the full year 2020, insurance non-interest income was $4.6 billion versus $4.3 billion in 2019, equal to an increase of 6.6% or $283 million. 

Total insurance revenue, including non-interest income, climbed to $4.8 billion in 2020 from $4.5 billion in 2019. This represents an increase of 5.6% or $255 million. 

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