Insurance

12 Months Ended

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.