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COVID-19 hits BMO’s insurance business

By Aurélia Morvan | May 29 2020 03:08PM

The net income of BMO’s insurance operations plunged by $95 million in the second quarter of 2020 versus the same quarter of 2019.

“The economic and social consequences of the COVID-19 pandemic have been immediate and disruptive,” stated Darryl White, CEO of BMO Financial Group.

In Q2, net income sank to $689 million, 54% lower than the $1.5 billion reported in Q2 2019. This result was “largely” due to higher provisions for credit losses, which swelled by $693 million after tax, BMO said.

Three sectors keep heads above water

In Retail, the bank reported net income for three of its five operating groups. Personal and Commercial Banking Services in Canada reported net income of $361 million, down 41.4%. Personal and Commercial Banking Services in the US reported net income of $339 million, equal to a 16.5% decline.

Lastly, BMO Wealth Management garnered net earnings of $144 million, equal to a 52.8% plunge. However, this sector consists of two subsectors, of which only one sustained a loss: insurance.

Loss in insurance

For its insurance operations alone, BMO reported a net loss of $16 million, versus net income of $79 million in Q2 2019. This amounts to a sharp drop of 120.2%, or $95 million “primarily due to the impact of unfavourable market movements, compared with the prior year,” BMO said.

For its Wealth Management operations alone, BMO reported net income of $160 million, versus $226 million in Q2 2019. This corresponds to a 29.2% drop.

Insurance revenue shrinks

Net of insurance claims, commissions and changes in policy benefit liabilities (CCPB), net insurance revenue of BMO Wealth Management for both subsectors combined was $1.08 billion, compared with $1.28 billion in Q2 2019, for a $194 million decline primarily due to lower insurance revenue, BMO explains.

Insurance revenue was down $123 million, from $136 million in Q2 2019 to $13 million in the same quarter of 2020.

Revenue derived from traditional wealth management business sank $71 million, from $1.4 billion in Q2 2019 to $1.07 million in the same quarter of 2020.

Two operating groups in the red

Three BMO operating groups remained in the black in Q2 2020, yet two others floundered.

BMO Capital Markets reported a net loss of $74 million, compared with net income of $250 million in Q2 2019.

The Corporate Services sector incurred a net loss of $81 million, versus a net loss of $80 million in the second quarter of 2019.

BMO is among the many lifecos that put in place measures to buffer the effects of the COVID-19 pandemic.

 
 
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