RBC Financial Group reported net earnings of $3.9 billion for the fourth quarter of 2021, which ran from August 1 to October 31. The corresponding increase is 19.9 per cent or $646 million (M) from the fourth quarter of 2020.

For the full year 2021, the financial institution reported net income of $16 billion, versus $11.4 billion in 2020. The corresponding increase is 40.3 per cent or $4.6 billion.
 

“Higher results in Wealth Management and Insurance” are among the factors that “contributed to the increase in net income” since last year, RBC says.

Wealth management  

For its wealth management segment, RBC reported net income of $2.6 billion for 2021, up from $2.1 billion for 2020. This increase of 21.9 per cent or $472 million is “mainly due to higher average fee-based client assets reflecting market appreciation… as well as net sales,” the financial institution explains.

RBC adds that “strong average volume growth of 10 per cent in loans and 17 per cent in deposits, also contributed to the increase,” largely in U.S. Wealth Management, including City National.

“These factors were partially offset by higher variable compensation and the impact of lower spreads, mainly due to lower interest rates and changes in average earning assets mix.” 

In Q4 2021 alone, net income for this segment was $558 million. It increased by 2.2 per cent or $12 million compared with the fourth quarter of 2020.
 

Insurance  

The insurance segment ended 2021 with net income of $889 million, up from $831 million in 2020. This increase of 7 per cent or $58 million is “largely due to favourable annual actuarial assumption updates and lower claims costs,” says RBC.

“These factors were partially offset by lower favourable investment-related experience,” along with “a lower impact from reinsurance contract renegotiations.” 

In Q4 2021 alone, net income for this segment was $267 million. It climbed 5.1 per cent or $13 million compared with the fourth quarter of 2020, “primarily due to favourable annual actuarial assumption updates, partially offset by lower favourable investment-related experience, including the impact of realized investment gains in the prior year,” RBC points out. 
 

Insurance revenue declines again in Canada  

RBC’s insurance reported revenue of $5.6 billion in 2021, up from $5.4 billion in 2020. This is an increase of 4.5 per cent or $239 million, “mainly reflecting higher group annuity sales as well as business growth, both of which are largely offset in policyholder benefits, claims and acquisition expense (PBCAE),” RBC says, adding that “these factors were partially offset by the change in fair value of investments backing policyholder liabilities and the impact of realized investment gains in the prior year.”
 

Looking at the results in closer detail, insurance revenue decreased in Canada, but increased internationally, as in 2020.
 

• In Canada, insurance revenue was $2.9 billion in 2021, down from $3 billion in 2020. This decline of 1.9 per cent or $57 million is “mainly due to the change in fair value of investments backing policyholder liabilities and the impact of realized investment gains in the prior year,” RBC said, adding that “these factors were partially offset by higher group annuity sales and business growth, primarily in segregated fund and individual life products, both of which are largely offset in PBCAE.” 
   

Increase in claims, losses and costs  

Insurance policyholder benefits, claims and acquisition expense (PBCAE) rose by 5.6 per cent or $208 million. PBCAE was $3.9 billion in 2021, compared with $3.7 billion in 2020.

This increase mainly reflects “higher group annuity sales and business growth, both of which are largely offset in revenue. Lower favourable investment-related experience and a lower impact from reinsurance contract renegotiations also contributed to the increase,” the financial institution explains. 

“These factors were partially offset by the change in fair value of investments backing policyholder liabilities, favourable annual actuarial assumption updates in the current year largely related to mortality and economic assumptions, and lower claims costs mainly in our travel and disability products,” RBC notes. 
 

Canada powers premium and deposit growth  

RBC’s insurance premiums and deposits were $5.7 billion in 2021, compared with $4.9 billion in 2020, for an increase of 15.6 per cent or $771 million.
 

Looking at the results in closer detail, premiums and deposits were driven by insurance in Canada, although they also grew internationally:
 

• In Canada, premiums and deposits totaled $3.2 billion in 2021, compared with $2.5 billion in 2020. This increase of 26.8 per cent or $669 million is “mainly due to group annuity, segregated fund and individual life products.”