RBC presents Insurance and Wealth Management results

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By Aurélia Morvan | May 28, 2021, 3:15 p.m.

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RBC Financial Group reported net income of $4 billion for all operations in the second quarter of 2021, up from $1.5 billion in Q2 2020. Its results thus increased by 171.1 per cent or $2.5 billion.

Out of six segments, five advanced, including insurance and wealth management.

Insurance and wealth management

RBC reported net income of $691 million ($M) in this segment, up from $424 million in Q2 2020. This increase of 63 per cent or $267 million is “primarily due to average loan growth and higher average fee-based client assets, net of the associated variable compensation.”

The financial group adds that the “lower provision for credit closes and higher transactional revenue also contributed to the increase.” All the same, these factors were “partially offset by the impact of lower interest rates.”

For its insurance business, RBC reported net income of $187 million, compared with $180 million in Q2 2020. This gain of 3.9 per cent or $7 million is linked to “lower claims costs as well as the favourable impact of actuarial adjustments,” the financial institution says.

However, these factors were “offset by the impact of realized investment gains in the prior year and lower new longevity reinsurance contracts.”

Insurance revenue: Loss in Canada

RBC's insurance revenue was $536 million in the second quarter of 2021, versus $197 million in Q2 2020. This represents an increase of 172.1 per cent or $339 million.

Looking at the results in closer detail, two sub-segments gained ground:

In Canada, the financial group reported a loss of $172 million in insurance revenues, compared with a loss of $344 million in the second quarter of 2020. Although still in the red, the performance improved by 50 per cent or $172 million.

International insurance revenues totalled $708 million, up from $541 million in Q2 2020. The corresponding increase is 30.9 per cent or $167 million.

Insurance revenues rose in Canada and internationally, “primarily reflecting the change in fair value of investments backing policyholder liabilities, which is largely offset in insurance policyholder benefits, claims and acquisition expenses,” RBC explains.

However, this factor was offset by “the impact of realized investment gains in the prior year” in Canada, and “lower international life volumes” for the international sector.

Policyholder benefits, claims and acquisition expense increased

The insurance policyholder benefits, claims and acquisition expense rose by $326 million. It represented a charge of $149 million in Q2 2021, versus a gain of $177 million in Q2 2020.

This is mainly due to “the change in fair value of investments backing policyholder liabilities, which is largely offset in revenue,” RBC says, adding that the impact of lower new longevity reinsurance contracts also fuelled the increase.

However, these factors were “partially offset by lower claims costs, mainly in our travel-related and disability products, as well as the impact of actuarial adjustments,” the financial institution explains.

Premiums and deposits rise in Canada

RBC’s insurance premiums and deposits rose to $1.2 billion in the second quarter of 2021, compared with $1.1 billion in Q2 2020. This represents an increase of 1.1 per cent or $13 million.

Looking at the results in closer detail: