Hey there, time traveller!
This article was published 30/7/2013 (1153 days ago), so information in it may no longer be current.
TORONTO -- TD Bank Group says recent severe flooding in Alberta and the Toronto area will likely result in a loss for its insurance business, which would have been profitable without the weather-related expenses.
TD Insurance faces an after-tax net loss of between $240 million to $290 million for the period, which includes the months of June and July, the bank announced Tuesday.
TD joins other major Canadian insurers in disclosing some of the costs associated with widespread severe flooding in southern Alberta in late June and a flash flood that inundated parts of the Toronto area in early July.
Excluding the weather-related and general insurance claims, TD Insurance would have had between $130 million and $180 million in net earnings during the quarter ending July 31.
TD Insurance is a small part of the banking group's overall business, which includes TD Canada Trust and a major banking arm in the United States.
On Tuesday, chief executive Ed Clark came to the defence of the bank's decision to remain in the auto insurance business.
"There's a lot of things that are not absolutely essential, but are we a better bank because we have this? Yes. And do we believe that the business can be run profitably? It can," he said on a conference call with analysts.
"We have to work our way through these things. But I think we're not going to exit this business. I think we're going to invest in this business, re-tune this business, tweak this business."
TD's auto insurance business has proven to be "challenged," Clark said, particularly in Ontario where the provincial government wants to reduce auto insurance by 15 per cent, on average.
"We'd like to see insurance premiums go down, too, but you have to then change the underlying cost structure," he said added.
In a note to clients, CIBC analyst Rob Sedran said while most of TD's announcement was expected, the non-weather component was a "modest negative" for its shares.
"Management has flagged a structural challenge to profitability and growth in a segment that is almost 10 per cent of the bank," he wrote.
"While we expect all of the banks to report some impact from this summer's severe weather, TD has the largest exposure to the auto insurance market and so we see more limited impact, if any, to the rest of the group."
Shares of TD Bank slid $1.64 or 1.86 per cent to $87.25 on the Toronto Stock Exchange.
Last week, Co-operators General Insurance Company dropped to a second-quarter loss of $5.9 million, mostly on costs from the floods in Alberta. The company said it lost around $77 million before taxes as a result of the Alberta floods, even after collecting reinsurance.
--The Canadian Press