TORONTO, July 30, 2013 /CNW/ - TD Bank Group (TD) (TSX and NYSE: TD)
announced today that it expects to report a third-quarter net loss in
its insurance business, estimated in the range of $240 million to $290
million after tax that will be reflected in TD's Wealth and Insurance
segment. The expected loss is a result of charges of approximately
$418 million after tax ($565 million before tax) or 45 cents per share
on a fully diluted basis, from a combination of severe weather-related
impact and increased general insurance claims. Excluding these charges,
Q3 2013 insurance earnings are estimated to be in the range of $130
million to $180 million after tax.
In addition, TD will recognize certain estimated non-insurance related
losses caused by severe weather in southern Alberta, which will be
treated as an item of note in TD's third quarter results.
Severe weather-related impact
TD Insurance expects that claims costs from the severe weather events in
southern Alberta on June 20 and the Greater Toronto Area (GTA) on July
8 will have a pre-tax impact of approximately $170 million after
reinsurance ($125 million after tax), reflecting claims for evacuation
and home and automobile damage.
In addition, TD will recognize a pre-tax provision of up to $125 million
($93 million after tax) related to the Alberta flood in its third
quarter, mainly reflecting loan losses in the real estate secured
lending portfolio. This charge will be treated as an item of note.
"While banks and insurance companies can incur losses from severe
weather events, our greatest concern is with the communities and
individuals who experienced the devastation in Alberta and the GTA. We
also thank our employees for their efforts to support our customers
through these events, when many employees themselves were dealing with
the impact," said Ed Clark, Group President & CEO, TD Bank Group.
Increased claims reserves
As indicated in the 2013 Second Quarter Report to Shareholders, in
recent years, TD Insurance has faced uncertainty related to automobile
insurance reforms. TD Insurance experienced an increase in third-party
bodily injury claims in 2012 related to pre-2010 automobile reform, and
insurance reserves were increased accordingly in the fourth quarter of
2012. Unfortunately, evidence from this year's claims development has
led TD to strengthen those reserves further and TD Insurance's third
quarter results will include an additional provision of approximately
$395 million pre-tax ($292 million after tax) to increase claims
reserves for its General Insurance business.
A continued increase in litigation, particularly in urban areas such as
Toronto, is contributing to greater uncertainty in determining the
ultimate expected costs of settling bodily injury automobile claims. In
addition, fraud continues to pose uncertainty related to accident
benefit claims in Ontario. These circumstances, taken together, have
caused TD Insurance to re-assess and increase the expected ultimate
loss rates for prior claim years when determining claims reserves.
"The Ontario auto insurance market has presented a significant challenge
to our business. And, while any loss is disappointing, increasing our
reserves in light of greater uncertainty is the prudent step for TD,"
said Clark. "TD will continue to work with governments across the
country to ensure appropriate, sustainable and affordable protection is
available for Canadians."
In the medium term, TD expects a modest decline in insurance earnings
from the normalized 2012 level of $600 million.
"Despite the challenges, we remain committed to our insurance business
and believe in its potential for acceptable returns and growing
profitability over time. We will continue to review and refine our
business model for home and auto insurance to ensure we are able to
offer high quality products and services to our customers," added
Clark.
Investor information and call:
An investor call about this announcement will be held at 8:30 a.m. ET
and is expected to last about 30 minutes. The call will feature remarks
by TD executives and will be followed by a question-and-answer period.
A listen-only telephone line will be available at 416-644-3416 or
1-800-814-4860 (toll free).
A replay of the call will be available from 9:30 a.m. ET on July 30,
2013 until August 30, 2013 by calling (416) 640-1917 or 1-877-289-8525
(toll-free). The passcode is 4633810, followed by the pound key.
Quarterly Earnings Announcement
TD's financial results for the third quarter of 2013 will be issued in a
press release and discussed in an investor call on August 29, 2013.
About TD Bank Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as
TD Bank Group (TD or the Bank). TD is the sixth largest bank in North
America by branches and serves approximately 22 million customers in
four key businesses operating in a number of locations in key financial
centres around the globe: Canadian Personal and Commercial Banking,
including TD Canada Trust and TD Auto Finance Canada; Wealth and
Insurance, including TD Wealth, TD Direct Investing, an investment in
TD Ameritrade, and TD Insurance; U.S. Personal and Commercial Banking,
including TD Bank, America's Most Convenient Bank, and TD Auto Finance
U.S.; and Wholesale Banking, including TD Securities. TD also ranks
among the world's leading online financial services firms, with
approximately 8 million active online and mobile customers. TD had
CDN$826 billion in assets on April 30, 2013.The Toronto-Dominion Bank
trades under the symbol "TD" on the Toronto and New York Stock
Exchanges.
Caution Regarding Forward-Looking Statements
From time to time, the Bank makes written and/or oral forward-looking
statements, including in this document, in other filings with Canadian
regulators or the U.S. Securities and Exchange Commission, and in other
communications. In addition, representatives of the Bank may make
forward-looking statements orally to analysts, investors, the media and
others. All such statements are made pursuant to the "safe harbour"
provisions of, and are intended to be forward-looking statements under,
applicable Canadian and U.S. securities legislation, including the U.S.
Private Securities Litigation Reform Act of 1995. Forward-looking
statements include, but are not limited to, statements made in this
document, the Management's Discussion and Analysis in the Bank's 2012
Annual Report ("2012 MD&A") under the headings "Economic Summary and
Outlook", for each business segment "Business Outlook and Focus for
2013" and in other statements regarding the Bank's objectives and
priorities for 2013 and beyond and strategies to achieve them, and the
Bank's anticipated financial performance. Forward-looking statements
are typically identified by words such as "will", "should", "believe",
"expect", "anticipate", "intend", "estimate", "plan", "may", and
"could".
By their very nature, these forward-looking statements require the Bank
to make assumptions and are subject to inherent risks and
uncertainties, general and specific. Especially in light of the
uncertainty related to the physical, financial, economic, political,
and regulatory environments, such risks and uncertainties - many of
which are beyond the Bank's control and the effects of which can be
difficult to predict - may cause actual results to differ materially
from the expectations expressed in the forward-looking statements. Risk
factors that could cause such differences include: credit, market
(including equity, commodity, foreign exchange, and interest rate),
liquidity, operational (including technology), reputational, insurance,
strategic, regulatory, legal, environmental, capital adequacy, and
other risks.. Examples of such risk factors include the impact of
recent U.S. legislative developments, as discussed under "Significant
Events in 2012" in the "Financial Results Overview" section of the
2012 MD&A; changes to and new interpretations of capital and liquidity
guidelines and reporting instructions; changes to the Bank's credit
ratings; increased funding costs for credit due to market illiquidity
and competition for funding; the occurrence of natural and unnatural
catastrophic events and claims resulting from such events; changes in
legislation or regulations affecting pricing of Bank products and
service; the failure of third parties to comply with their obligations
to the Bank or its affiliates relating to the care and control of
information; disruptions in or attacks (including cyber attacks) on the
Bank's information technology, internet, network access or other voice
or data communications systems or services; and the overall difficult
litigation environment, including in the United States. We caution that
the preceding list is not exhaustive of all possible risk factors and
other factors could also adversely affect the Bank's results. For more
detailed information, please see the "Risk Factors and Management"
section of the 2012 MD&A. All such factors should be considered
carefully, as well as other uncertainties and potential events, and the
inherent uncertainty of forward-looking statements, when making
decisions with respect to the Bank and we caution readers not to place
undue reliance on the Bank's forward-looking statements.
Certain material assumptions underlie the forward-looking statements
contained in this document including that there will be no further
catastrophic events that could impact the performance of the insurance
business or the Bank prior to the third quarter. Additional material
economic assumptions underlying the forward-looking statements
contained in this document are set out in the 2012 MD&A under the
headings "Economic Summary and Outlook", and for each business segment,
"Business Outlook and Focus for 2013", each as updated in subsequently
filed quarterly reports to shareholders. Any forward-looking
statements contained in this document represent the views of management
only as of the date hereof and are presented for the purpose of
assisting the Bank's shareholders and analysts in understanding the
Bank's financial position, objectives and priorities and anticipated
financial performance as at and for the periods ended on the dates
presented, and may not be appropriate for other purposes. The Bank does
not undertake to update any forward-looking statements, whether written
or oral, that may be made from time to time by or on its behalf, except
as required under applicable securities legislation.
Note on financial reporting standards
The Bank prepares its consolidated financial statements in accordance
with International Financial Reporting Standards (IFRS), the current
generally accepted accounting principles (GAAP), and refers to results
prepared in accordance with IFRS as the "reported" results. The Bank
also utilizes non-GAAP financial measures referred to as "adjusted"
results (i.e. reported results excluding "items of note", net of income
taxes) to assess each of its businesses and measure overall Bank
performance. The items of note relate to items which management does
not believe are indicative of underlying business performance. See "How
the Bank Reports" in the Bank's Second Quarter 2013 Earnings News
Release and MD&A (td.com/investor) for further explanation, reported basis results, a list of the items
of note, and a reconciliation of non-GAAP measures.
SOURCE TD Bank Group
