RBC Financial Group reported net income of $4.3 billion for all operations in third quarter 2021, which ran from May 1 to July 31.

This result amounts to an increase of 34.2 per cent or $1.1 billion from the $3.2 billion in net income reported in Q3 2020.

The performance was notably driven by growth in the insurance and asset management sectors.

Wealth management net income

In wealth management, RBC reported net income of $738 million in third quarter 2021, up from $562 million in Q3 2020. RBC says that this increase of 31.3 per cent or $176 million is “mainly due to higher average fee-based client assets.”

“Average volume growth and lower provision for credit losses also contributed to the increase,” RBC adds.

The firm adds that these “factors were partially offset by higher variable compensation as well as the impact of lower spreads.” 

Insurance net income 

For its insurance business, RBC reported net income of $234 million in third quarter 2021, compared with $216 million in Q3 2020. This increase of 8.3 per cent or $18 million is “primarily due to the impact of new longevity reinsurance contracts, lower claims costs and the favourable impact of actuarial adjustments.”

 “These factors were partially offset by the impact of realized investment gains in the prior year,” the institution adds.

Insurance revenue 

RBC’s insurance revenue was $1.7 billion in third quarter 2021, down from $2.2 billion in Q3 2020. The decline of 20.7 per cent or $458 million primarily reflects “the change in fair value of investments backing policyholder liabilities, which is largely offset in policyholder benefits, claims and acquisition expense (PBCAE),” RBC says. 

Income declined in Canada in particular. RBC reported $1.1 billion in insurance revenue in third quarter 2021, down from $1.6 billion in Q3 2020. The decrease of 30.6 per cent or $500 million is primarily due to “the impact of new longevity reinsurance contracts, lower claims costs and the favourable impact of actuarial adjustments. These factors were partially offset by the impact of realized investment gains in the prior year,” RBC explains. 

Conversely, international insurance revenue rose by 7.3 per cent or $42 million. It reached $618 million in third quarter 2021, compared with $576 million in Q3 2020. The main cause: “business growth in longevity reinsurance. This was partially offset by the change in fair value of investments backing policyholder liabilities, which is largely offset in PBCAE.” 

PBCAE  

Insurance policyholder benefits, claims and acquisition expense slumped by 26.9 per cent or $481 million from $1.8 billion in third quarter 2020 to $1.3 billion in Q3 2021.

This downturn primarily reflects “the change in fair value of investments backing policyholder liabilities, which is largely offset in revenue,” RBC says.

“The impact of new longevity reinsurance contracts, lower claims costs mainly in our travel-related and disability products, and actuarial adjustments also contributed to the decrease,” RBC notes. However, these factors “were partially offset by business growth in International Insurance.”

Premiums and deposits  

RBC’s insurance premiums and deposits were $1.3 billion in third quarter 2021, compared with $1.1 billion in Q3 2020. They thus increased by 16.8 per cent or $190 million.

In Canada, premiums and deposits were $645 million in third quarter 2021 versus $536 million in Q3 2020. They rose by 20.3 per cent or $109 million.

International premiums and deposits were $676 million in Q3 2021 compared with $595 million in Q3 2020. The corresponding increase is 13.6 per cent or $81 million.

BMO also released its financial results for third quarter 2021, including its insurance and wealth management results.