BMO triples net insurance income

By Aurélia Morvan | August 26 2020 04:02PM

Photo: Freepik

BMO Financial Group reported net income of $1.2 billion in Q3 2020. This result is 20.9% or $325 million (M$) lower than the net income of $1.5 billion reported in Q3 2019.

Progress in insurance

The BMO Wealth Management sector reported net income of $341 million, up 36.4% or $91 million compared with the $250 million reported in Q3 2019. This sector includes two subsectors: insurance and wealth management, each of which advanced.

For wealth management operations alone, BMO reported net earnings of $271 million, versus $226 million in Q3 2019. This result amounts to an increase of 19.9% or $45 million “primarily driven by lower expenses and higher revenue, partially offset by higher provisions for credit lossses. Insurance net income was $70 million, an increase of $46 million, primarily due to higher revenue,” the company says.

“Total provision for credit losses was $1,054 million, an increase of $748 million from the prior year, with the year-over-year change due to the impact of COVID-19,” BMO continues.

After sustaining a net loss in the previous quarter, insurance operations generated net income of $70 million in Q3 2020. They ballooned by 191.7%, or $46 million, versus net income of $24 million reported in Q3 2019, “primarily due to higher revenue,” the Group points out.

More specifically, the company said that this result is mainly due to “below-trend reinsurance results” and to the impact of market movements that was “favourable,” as opposed to the “unfavourable” effect in the corresponding quarter in 2019.

Insurance income growth

Net income of BMO Wealth Management, for the two subsectors combined, less insurance claims, commissions and changes in policy benefit liabilities (CCPB), was $1.3 billion, versus $1.2 billion in Q3 2019. This amounts to an upswing of 5.6% or $69 million.

Insurance revenue was $119 million. It climbed 63% or $46 million “primarily due to the net income drivers noted above,” BMO notes.

By comparison, wealth management revenue was $1.2 billion, rising 2% or $23 million “primarily due to stronger global markets benefitting our diversified businesses and higher online brokerage revenue, partially offset by lower net interest revenue,” BMO points out.

Another sector progresses

BMO Capital Markets also saw results improve. In this sector, the group reported net income of $426 million, compared with $314 million in Q3 2019, for a 35.7% increase.

Three sectors slide

Canadian Personal and Commercial Banking reported net income of $320 million, down 50.8% from the $650 million reported in Q3 2019. U.S. Personal and Commercial Banking reported net income of $192 million, down 30.9% compared with $278 million reported in the third quarter of 2019.

Lastly, Corporate Services reported a net loss of $118 million, a 50.8% decrease versus a net loss of $25 million in Q3 2019.

Royal Bank of Canada (RBC) and Toronto-Dominion Bank (TD) has also reported its financial results, including for its insurance operations, for the third quarter of 2020.

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