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Gross earned premiums down 4.8% at Toronto Dominion Bank


December 3, 2015   by Canadian Underwriter


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The Toronto Dominion Bank reported Thursday a 13.2% drop in insurance claims and related expenses, due in part to less severe weather conditions and a change in the mix of reinsurance contracts, while gross written premiums dropped nearly 5%.

TD, whose fiscal year end is Oct. 31, released its financial results Dec. 3.

The Toronto Dominion Bank reported a 4.8% drop in gross earned premiums in insurance in 2015

TD reported total gross earned premiums – including life, health, auto, home and creditor protection – of $4.22 billion for the 12 months ending Oct. 31, down 4.8% from $4.423 billion in the year ending Oct. 31, 2014.

TD writes home and auto insurance through Meloche Monnex Inc., which in turn owns Security National Insurance Company. TD also writes credit protection, travel insurance and life and health. TD did not report specifically on its property & casualty performance, though the bank reported that within P&C, 68.9% of net written premiums were derived from automobile policies and 30.6% were from residential policies.

In a note to its financial statement, TD reported its P&C business “is mostly concentrated in Ontario” with 59.0% of net written premiums in the year ending Oct. 31, 2015. The western provinces represented 28.8% of premiums, followed by the Atlantic provinces with 6.3% and Quebec with 5.9%.

Across all insurance lines, TD reported net earned premiums of $3.329 billion in 2015, compared to $3.567 billion in 2014.

For the three months ending Oct. 31, TD reported insurance revenue of $977 million in 2015, down from $1.001 billion for the same period in 2014.

TD Insurance ranked third in P&C – behind Intact and Aviva – when measured by net premiums written in 2014, according to the Canadian Underwriter Statistical issue. Desjardins and State Farm were counted separately in 2014, but now that Desjardins’ acquisition of the Canadian operations of State Farm is complete, Desjardins and Aviva are essentially tied in second place.

In the year ending Oct. 31, TD reported insurance claims and related expenses of $2.5 billion in 2015, down 13.2% from $2.833 billion in 2014. TD attributed the decrease “primarily due to a change in mix of reinsurance contracts, more favourable prior years’ development, less severe weather conditions, and lower current year claims costs.”

In the most recent quarter, TD reported insurance claims and other related expenses of $637 million this year, down 12% from $720 million in the three months ending Oct. 31, 2014. This decrease was “primarily due to the change in mix of reinsurance contracts, more favourable prior years’ development and the change in fair value of investments supporting claims liabilities, partially offset by higher current year claims costs.”

For the entire bank, TD reported net income of $8.024 billion on revenue of $31.426 billion in fiscal year 2015, compared to net income of $7.883 billion on revenue of $29.961 billion in the year ending Oct. 31, 2014.

In the latest quarter, TD reported net income of $1.839 billion in revenue of $8.047 billion, compared to net income of $1.7467 billion on revenue of $7.452 billion during the quarter ending Oct. 31, 2014.

The other Big 5 Canadian bank that writes home and auto insurance is Royal Bank of Canada. RBC ranked 15th in Canadian Underwriter’s statistical issue. RBC reported Wednesday net earned premiums of $3.507 billion – and P&C revenues of $958 million – in 2015.

The federal Bank Act stipulates that Canadian banks are “authorized” to sell eight types of insurance: credit or charge card-related; creditors’ disability; creditors’ life; creditors’ loss of employment; creditors’ vehicle inventory; export credit; mortgage; and travel.

Banks may not sell home or auto insurance from their bank branches. They may sell P&C through subsidiaries but are not allowed to provide access, from the banks’ web pages, to other web pages through which non-authorized types of insurance are sold.

The Bank Act is up for review in 2017. Canada’s insurance brokers’ associations are lobbying new members of parliament to keep the current restrictions in place, contending that financial institutions should not be allowed to sell insurance at the point of granting credit. Bank of Montreal does not provide either home or auto insurance, while the Bank of Nova Scotia and the Canadian Imperial Bank of Commerce sell home and auto insurance written by subsidiaries of Desjardins. National Bank of Canada sells home and auto insurance from InnovAssur assurances générales inc. – a joint venture that National Bank formed with AXA, whose Canadian operations were acquired in 2011 by Intact Financial Corp.