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Insurance | 12 Months Ended
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Oct. 31, 2025
Insurance [Abstract] |
Insurance | NOTE 20: INSURANCE (a) INSURANCE SERVICE RESULT Insurance revenue and expenses are presented on the Consolidated Statement of Income under Insurance revenue and Insurance service expenses, respectively. Net income or expense from reinsurance is presented in other income (loss). The following table shows components of the insurance service result included in the Consolidated Statement of Income for the Bank which includes the results of property and casualty insurance, life and health insurance, as well as reinsurance issued and held in Canada and internationally. Insurance Service Result (millions of Canadian dollars) For the year ended October 31, 2025 October 31, 2024 Insurance revenue $ 7,737 $ 6,952 Insurance service expenses 6,089 6,647 Insurance service result before reinsurance contracts held 1,648 305 Net income (expense) from reinsurance contracts held (172) 524 Insurance service result $ 1,476 $ 829 Net income (expense) from reinsurance contracts held is comprised of recoveries from reinsurers offset by ceded premiums. For the year ended October 31, 2025, the Bank recognized recoveries from reinsurers of $ 439 million (October 31, 2024 – $ 1,054 million) and ceded premiums of $ 611 million (October 31, 2024 – $ 530 million). For the year ended October 31, 2025, the Bank recognized insurance finance expenses of $ 299 million (October 31, 2024 – $ 443 million) from insurance and reinsurance contracts in other income (loss). The Bank’s investment return on securities supporting insurance contracts is comprised of interest income reported in net interest income and fair value changes reported in other income (loss). Investment return on securities supporting insurance contracts was $ 247 million for the year ended October 31, 2025 (October 31, 2024 – $ 372 million). (b) INSURANCE CONTRACT LIABILITIES Insurance contract liabilities are comprised of amounts related to the LRC, LIC and other insurance liabilities. The following table presents movements in the property and casualty insurance liabilities. Property and casualty insurance contract liabilities by LRC and LIC (millions of Canadian dollars) For the year ended October 31, 2025 Liabilities for remaining coverage Liabilities for incurred claims Total Excluding Estimates of the loss Loss present value of Risk component component future cash flows adjustment Insurance contract liabilities at beginning of year $ 714 $ 101 $ 5,989 $ 221 $ 7,025 Insurance revenue (6,230) (6,230) Insurance service expenses: Incurred claims and other insurance service expenses – (148) 4,420 70 4,342 Amortization of insurance acquisition cash flows 864 – – – 864 Losses (reversal of losses) on onerous contracts – 163 – – 163 Changes to liabilities for incurred claims – – (34) (116) (150) Insurance service result (5,366) 15 4,386 (46) (1,011) Insurance finance expenses 2 – 332 11 345 Total changes in the Consolidated Statement of Income (5,364) 15 4,718 (35) (666) Cash flows: Premiums received 6,268 – – – 6,268 Claims and other insurance service expenses paid – – (4,576) – (4,576) Acquisition cash flows paid (912) – – – (912) Total cash flows 5,356 – (4,576) – 780 Insurance contract liabilities at end of year $ 706 $ 116 $ 6,131 $ 186 $ 7,139 Property and casualty insurance contract liabilities by LRC and LIC (millions of Canadian dollars) For the year ended October 31, 2024 Liabilities for remaining coverage Liabilities for incurred claims Total Excluding Estimates of the loss Loss present value of Risk component component future cash flows adjustment Insurance contract liabilities at beginning of year $ 630 $ 129 $ 4,740 $ 220 $ 5,719 Insurance revenue (5,506) – – – (5,506) Insurance service expenses: Incurred claims and other insurance service expenses – (145) 5,099 96 5,050 Amortization of insurance acquisition cash flows 803 – – – 803 Losses (reversal of losses) on onerous contracts – 117 – – 117 Changes to liabilities for incurred claims – – (65) (114) (179) Insurance service result (4,703) (28) 5,034 (18) 285 Insurance finance expenses 7 – 479 19 505 Total changes in the Consolidated Statement of Income (4,696) (28) 5,513 1 790 Cash flows: Premiums received 5,576 – – – 5,576 Claims and other insurance service expenses paid – – (4,264) – (4,264) Acquisition cash flows paid (796) – – – (796) Total cash flows 4,780 – (4,264) – 516 Insurance contract liabilities at end of year $ 714 $ 101 $ 5,989 $ 221 $ 7,025 Other insurance contract liabilities were $ 139 million as at October 31, 2025 (October 31, 2024 – $ 144 million) and include life and health insurance contract liabilities of $ 113 million (October 31, 2024 – $ 121 million). (c) PROPERTY AND CASUALTY CLAIMS DEVELOPMENT The following table shows the estimates of the insurance liabilities for incurred claims net of reinsurance assets for incurred claims (net LIC) with subsequent developments during the periods and cumulative payments to date. The original estimates are evaluated monthly for redundancy or deficiency. The evaluation is based on actual payments in full or partial settlement of claims and current estimates of the net LIC related to claims still open or claims still unreported. Incurred Claims by Accident Year (millions of Canadian dollars) Accident Year 2016 and prior 2017 2018 2019 2020 2021 2022 2023 2024 2025 Total Net ultimate claims cost at end of accident year $ 6,645 $ 2,425 $ 2,631 $ 2,727 $ 2,646 $ 2,529 $ 3,242 $ 3,830 $ 4,478 $ 4,397 Revised estimates One year later 6,327 2,307 2,615 2,684 2,499 2,367 3,182 4,039 4,515 Two years later 5,990 2,258 2,573 2,654 2,412 2,278 3,167 3,994 Three years later 5,647 2,201 2,522 2,575 2,278 2,225 3,165 Four years later 5,440 2,151 2,465 2,489 2,230 2,211 Five years later 5,377 2,108 2,408 2,474 2,224 Six years later 5,315 2,086 2,396 2,471 Seven years later 5,281 2,078 2,399 Eight years later 5,267 2,078 Nine years later 5,266 Current estimates of cumulative net claims 5,266 2,078 2,399 2,471 2,224 2,211 3,165 3,994 4,515 4,397 Cumulative net claims paid to date (5,115) (2,033) (2,309) (2,335) (2,059) (1,961) (2,662) (3,057) (3,010) (2,178) Net undiscounted provision for unpaid claims 151 45 90 136 165 250 503 937 1,505 2,219 $ 6,001 Effect of discounting (517) Effect of risk adjustment for non-financial risk 167 Net liabilities for incurred claims $ 5,651 Insurance liabilities for incurred claims 6,317 Reinsurance assets for incurred claims (666) (d) RISK ADJUSTMENT FOR NON-FINANCIAL RISK AND DISCOUNTING The risk adjustment reflects an amount that an insurer would reasonably pay to remove the uncertainty that future cash flows will exceed the expected value amount. The Bank has estimated the risk adjustment for its property and casualty operations’ LIC using statistical techniques in accordance with Canadian accepted actuarial principles to develop potential future observations and a confidence level range of 75 th to 85 th percentile. Insurance contract liabilities are calculated by discounting expected future cash flows. The interest rates used to discount the Bank’s insurance balances over a duration of 1 to 10 years range from 2.8 % to 4.1 % as at October 31, 2025 (October 31, 2024 – 3.8 % to 4.5 %). (e) SENSITIVITY TO INSURANCE RISK A variety of assumptions are made related to the future level of claims, policyholder behaviour, expenses and sales levels when products are designed and priced, as well as when actuarial liabilities are determined. Such assumptions require a significant amount of professional judgment. The LIC is sensitive to certain assumptions. It has not been possible to quantify the sensitivity of certain assumptions such as legislative changes or uncertainty in the estimation process. Actual experience may differ from the assumptions made by the Bank. For property and casualty insurance, the main assumption underlying the LIC is that past claims development experience can be used to project future claims development and hence ultimate claims costs. As such, these methods extrapolate the development of paid and incurred losses, average costs per claim, and claim numbers based on the observed development of earlier years and expected loss ratios. Net LIC estimates are based on various quantitative and qualitative factors including the discount rate, the risk adjustment, reinsurance, trends in claims severity and frequency, and other external drivers. Qualitative and other unforeseen factors could negatively impact the Bank’s ability to accurately assess the risk of the insurance policies that the Bank underwrites. In addition, there may be significant lags between the occurrence of an insured event and the time it is actually reported to the Bank and additional lags between the time of reporting and final settlements of claims. The following table outlines the sensitivity of the Bank’s property and casualty LIC to reasonably possible movements in the discount rate, risk adjustment, and the frequency and severity of claims, with all other assumptions held constant. Movements in the assumptions may be non-linear. Sensitivity of Critical Assumptions – Property and Casualty Insurance (millions of Canadian dollars) As at October 31, 2025 October 31, 2024 Impact on net Impact on net income (loss) income (loss) before Impact on before Impact on income taxes equity income taxes equity Impact of a 1% change Discount rate Increase in assumption $ 135 $ 100 $ 121 $ 90 Decrease in assumption (143) (107) (129) (95) Impact of a 5% change Frequency of claims Increase in assumption $ (202) $ (150) $ (182) $ (135) Decrease in assumption 202 150 182 135 Severity of claims Increase in assumption (289) (215) (288) (213) Decrease in assumption 289 215 288 213 Risk adjustment Increase in assumption (39) (29) (52) (38) Decrease in assumption 34 25 40 29 For life and health insurance, the processes used to determine critical assumptions are as follows: ● Mortality, morbidity, and lapse assumptions are based on industry and historical company data; and ● Expense assumptions are based on the annual expense study. Sensitivity analysis was performed on these critical assumptions for the life and health insurance business and impacts were deemed not significant to the Bank’s Consolidated Financial Statements. (f) CONCENTRATION OF INSURANCE RISK Concentration risk is the risk resulting from large exposures to similar risks that are positively correlated. Risk associated with automobile, residential and other products may vary in relation to the geographical area of the risk insured. Exposure to concentrations of insurance risk, by type of risk, is mitigated by ceding these risks through reinsurance contracts, as well as careful selection and implementation of underwriting strategies, which is in turn largely achieved through diversification by line of business and geographical areas. For automobile insurance, legislation is in place at a provincial level and this creates differences in risk selection and underwriting strategies among the different provinces. As at October 31, 2025, for the property and casualty insurance business, 64.3 % of insurance revenue was mainly derived from automobile policies (October 31, 2024 – 65.5 %) followed by residential with 35.3 % (October 31, 2024 – 34.3 %). The distribution by provinces show that business is mostly concentrated in Ontario with 51.4 % of insurance revenue (October 31, 2024 – 50.5 %). The Western provinces represented 31.0 % (October 31, 2024 – 31.9 %), followed by the Atlantic provinces with 10.5 % (October 31, 2024 – 10.6 %), and Québec at 6.7 % (October 31, 2024 – 6.8 %). Concentration risk is not a major concern for the life and health insurance business as it does not have a material level of regional specific characteristics like those exhibited in the property and casualty insurance business. Reinsurance is used to limit the liability on a single claim and from a single weather-related event. Concentration risk is further limited by diversification across uncorrelated risks. This limits the impact of a regional pandemic and other concentration risks. To improve understanding of exposure to this risk, a pandemic scenario is tested annually.

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