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TD also sees insurance gains

By Aurélia Morvan | August 28 2020 04:28PM

Photo: Freepik

For all operations combined, Toronto-Dominion Bank (TD) reported net income of $2.2 billion (B) in the third quarter of 2020, a period ranging from May 1 to July 31. This result signals a plunge of 30.8% or $1 B compared with Q3 2019, when the bank’s net income was $3.2 B.

This decline is due to “higher provisions for credit losses (PCL) and higher insurance claims,” TD explains, adding that it was "partially offset by higher revenue and lower non-interest expenses."

Insurance progresses

For the Canadian Retail division, the sector that includes the bank’s life insurance and P&C activities, TD reported net income of $1.3 B in Q3 2020, versus $1.9 B in the same quarter of 2019. This result, which is 33.2% or $627 M lower, mainly reflects “higher provisions for credit losses (PCL), lower revenue and higher insurance claims,” TD says.

Upon closer scrutiny, of the three components in the sector, two advanced, namely insurance and wealth management, while one declined. TD reported net income of $721 M for its commercial and consumer banking services in Canada, down 49.3% or $701 M versus the third quarter of 2019, when net income was $1.4 B.

TD reported net income of $361 M for its wealth management operations, for growth of 15.5% or $58 M versus Q3 2019, when net income was $303 M.

Lastly, TD reported net income of $181 M for insurance activities, up from $165 M in Q3 2019. It thus achieved growth of 9.7% or $16 M.

Insurance products advance...

Overall, non-interest products of the Canadian Retail division totalled $3.1 B in Q3 2020. They edged up 3% or $92 M since the third quarter of 2019, when they were $3 B. TD attributes this rise to “higher transaction and fee-based revenue in the wealth business” and to “higher transaction and fee-based revenue in the wealth business.” Another driver is a “$47 M increase in the fair value of investments supporting claims liabilities which resulted in a similar increase to insurance claims.” The bank says that these elements were “partially offset by lower fee income reflecting reduced customer activity, particularly in the credit cards business.”

Insurance revenue alone totalled $1.2. It climbed 8.2% or $89 M since Q3 2019, when it was $1.1 B.

…and gross premiums too

Gross originated insurance premiums were $1.4 B, up from $1.3 B in Q3 2019. This increase amounts to 8.6% or $108 M.

Expenses also higher

Insurance claims and related expenses increased by 13.1% or $93 M. They totalled $805 M in Q3 2020, compared with $712 M in the corresponding quarter of 2019.

“The increase reflects less favourable prior years' claims development, higher severe weather-related events and a $37 million increase in the fair value of investments supporting claims liabilities which resulted in a similar increase to non-interest income,” TD says. This increase was, however, “partially offset by more favourable current year claims.”

Royal Bank of Canada (RBC) and Bank of Montréal (BMO) also reported their Q3 2020 results. Similar to TD, both banks saw positive results in insurance.

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