Briefly:

(August 21, 2003) Insurance agents run the risk of losing their high net worth clients to retail broker-dealers if they don’t start taking advantage of technology, according to a report from Forrester Research in the U.S.

The report says in the U.S. the two industries are increasingly moving into fee-based full-service financial advisory roles, with their key strategy being poaching each other’s clients. But insurance agents are earning less while servicing more clients.

Forrester suggests that insurance agents are not using technology to its fullest potential, while broker-dealers are more likely to use contact management software, to research products online and to be generally more optimistic about the role technology can play in fostering client relationships.

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Dollarization not on the rise, central bank says

(August 21, 2003) Despite suggestions that the U.S. dollar has taken over as Canada’s preferred currency, the loonie still reigns supreme, according to a report released today by the Bank of Canada.

The use of the U.S. dollar in Canada is very limited, the Dollarization in Canada report concludes. Only 5% of nearly 400 Canadian firms surveyed last year said they quoted prices or produced financial statements exclusively in U.S. dollars. No firms said they reported salaries exclusively in U.S. dollars.

“The results suggest that the Canadian dollar is still strongly preferred for most pricing and financial reporting activities in Canada, there is very little evidence of dollarization.”

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Manulife caps E&P Balanced Fund

(August 21, 2003) Manulife Mutual Funds has announced the capping of the Elliott & Page Balanced Fund Advisor and F Classes, as of August 28, 2003.

“We are currently evaluating the best possible options for our investors and in the coming months — expect to propose additional recommendations for the fund,” said Eric Grove, vice-president of investment funds at Manulife Financial.

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CIBC posts strong profits

(August 20, 2003) CIBC has released its earnings report for its third quarter, posting a profit of $788 million or $2.02 per share, up from $193 million for Q3 of 2002. Second-quarter earnings had come in at $320 million.

“CIBC’s third-quarter performance continues a favourable trend that began earlier this year and demonstrates the success of our ongoing efforts to build core businesses, strengthen the balance sheet, adjust business mix and reduce our risk profile,” said John S. Hunkin, president and CEO.

The bank admitted that a big chunk of its profits came from a $707 million tax settlement in favour of CIBC, but that a big bite was taken from this windfall, including a loss of $88 million stemming from the sale of its non-core corporate loans and a valuation allowance of $232 million against its U.S. future income tax asset.

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Equity funds post returns in the black

(August 19, 2003) Not only are they selling well, but equity funds are making money for investors, according to Morningstar. July was the fourth straight month of positive returns for the industry, with Asia growth stock funds leading the charge.

By month’s end, 27 of Morningstar’s 32 indices had posted positive returns and July marked the first time most indices — 23 — reported one-year returns in the black. Indices that lagged the pack included income or money market funds, as investors return to growth equity.

“Most major equities markets ended the month with gains in the high single digits, a result of generally improving economic indicators in the U.S. and second-quarter earnings that largely delivered on analysts’ and investors’ expectations,” said Gareth Tingling, Morningstar Canada’s manager of fund research.

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Royal Bank settles with Enron

(August 19, 2003) Royal Bank of Canada has reached an agreement with Enron Corporation, the Enron Creditors’ Committee and Rabobank that will see RBC receive $195 million US plus interest over a structured transaction known as “Cerberus.”

The complex transaction involved the sale of over 11 million shares of EOG Resources, in which Rabobank assumed the credit risk, but defaulted on a payment of $517 million US to RBC. Following the collapse of Enron, the EOG shares were sold and $440 million US in proceeds were deposited into an escrow account, until the competing claims over the transaction could be sorted out.

RBC is still involved in litigation with Rabobank and says the $195 million US could be deducted from their claim of $ 517 million US against Rabobank, but that the suit was otherwise unaffected.

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CanDeal announces new trade-clearing platform

(August 19, 2003) The online debt trading platform, CanDeal, has announced the release of DealXpress 1.0, a system which the company says is a step toward straight-through-processing (STP) in bond trading.

“The ability to pass financial information electronically on a timely, accurate system-to-system basis — to all parties in a transaction chain — is considered a prerequisite to shortening the settlement cycle to T+1,” says Jayson Horner, president and CEO CanDeal.

CanDeal says the new system will pass trade information between all involved parties quickly and will reduce trade processing costs and increase the speed of the settlement process.

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TD Bank buys 57 Laurentian branches

(August 18, 2003) TD Bank Financial Group has announced the acquisition of 57 bank branches in Ontario and Western Canada from Laurentian Bank, as TD moves to strengthen its retail banking business.

“The acquisition of the 57 Laurentian Bank branches represents a significant opportunity for TD Canada Trust to grow its franchise and enhance its market presence in Ontario and Western Canada,” said TD Canada Trust president Andrea Rosen.

The acquisition brings to TD a loan portfolio worth $2 billion and a deposit portfolio valued at $1.9 billion. The all-cash purchase price reflects the book value of assets sold, less liabilities assumed plus a $112.5 million premium.

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Industrial Alliance enters funds industry

(August 18, 2003) Industrial Alliance Insurance has announced the purchase of Co-operators Mutual Funds Limited (CMFL), a subsidiary of fellow insurer The Co-operators Group Limited.

“This acquisition will also allow us to further broaden our product range,” says Normand Pépin, executive vice-president at Industrial Alliance. “Our representatives will now be able to offer an extended line of life insurance products as well as wealth management products, such as mutual funds, segregated funds and securities.”

CFML is trustee, manager and promoter of 11 funds under three brand names: the Co-operators Heritage Mutual Funds, the Co-operators/Crystal Mutual Funds and the Co-operators/Credit Suisse Mutual Funds.

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(08/18/03)