Flooding in Alberta, Toronto will push TD insurance business to a Q3 loss

TORONTO – TD Bank Group (TSX:TD) says recent severe flooding in Alberta and the Toronto area will likely cause a loss in 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 several 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 of 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.

In a note to clients, CIBC analyst Rob Sedran said that 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 $1.17 to $87.72 near mid-morning on the Toronto Stock Exchange.

Last week, Co-operators General Insurance Company (TSX:CCS.PR.C) 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.

Intact Financial Corp. (TSX:IFC), which is Canada’s largest publicly traded property and casualty insurance company, expects to book about $257 million in costs over the second and third quarters as a result of catastrophic losses.

Intact’s estimate includes costs associated with the Alberta flooding in June at the end of the company’s second quarter and from flooding in Toronto and the Lac-Megantic train disaster in Quebec in July during the early part of its third quarter.