Mixed results for banks’ insurance businesses

By Aurélia Morvan | September 04 2019 09:30AM

In late August, the Canadian banks published their financial results for third quarter 2019, covering the period of May 1 to July 31. Toronto Dominion Bank (TD), Bank of Montréal (BMO) and Royal Bank of Canada (RBC) announced their insurance results.

Insurance gains at RBC

RBC, a bank that offers life and health and P&C insurance, reported net income of $3.3 billion for Q3 2019. Its insurance activities alone generated net income of $204 million. The insurance division thus represents 6% of the bank’s total net income. Net income in insurance in Q3 2019 climbed 29% compared with the same quarter of 2018, when RBC declared net income in insurance of $158 million.

The bank says this increase primarily reflects “higher favourable investment-related experience and the impact of new longevity reinsurance contracts.” It adds, however, that “these factors were partially offset by higher disability and life retrocession claims costs and favourable reinsurance contract renegotiations in the prior year.”

Difficult quarter for BMO

BMO Financial Group, which offers life and health and insurance, announced net income of $1.6 billion for Q3 2019. For its BMO wealth management division alone, net income totalled $249 million for Q3 2019. Of this total, $225 million was linked to traditional wealth management activities.

The remaining $24 million in net income stem from insurance activities, which thus represent 1.5% of the total net income reported by BMO Financial Group. Net income from BMO’s insurance activities in Q3 2019 plunged 73% since the same quarter of 2018, when it stood at $89 million. This is “primarily due to lower reinsurance results and unfavourable market movements in the current year relative to favourable movements in the prior year,” BMO says.

Claims and premiums rise at TD

TD Bank Group, which sells P&C insurance, reported net income of $3.2 billion for Q3 2019. For its retail operations in Canada, the only market where the group offers insurance, net income was $1.9 billion, up by $38 million, or 2%, from the same period last year. This increase is driven by “revenue growth,” mainly linked to “higher insurance premiums.” Yet this growth was “partially offset by higher non-interest expenses,” mainly resulting from “higher insurance claims.”

Insurance claims and related charges totalled $712 million in Q3 2019, versus $627 million in the same quarter of 2018, for an increase of $85 million or 13.6%. “The increase reflects increased business volumes, higher current year claims, and changes in the fair value of investments supporting claims liabilities, partially offset by less severe weather-related events and more favourable prior years’ claims development,” TD says.

The financial results published by National Bank of Canada (NBC), The Canadian Imperial Bank of Commerce (CIBC) and Scotia Bank for Q3 2019 did not specify the results for the banks’ insurance activities.

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