Financial Results
Adoption of IFRS 17 Insurance Contracts
Overview of accounting change and impacts
•
Effective November 1, 2023, we adopted IFRS 17 Insurance Contracts (IFRS 17) which replaced existing IFRS 4 Insurance Contracts (IFRS 4)
We applied the full retrospective approach to our creditor business and the fair value approach to all other products written prior to
November 1, 2022. Changes were applied retrospectively to Fiscal 2023, resulting in an increase in net income
Fiscal 2023 results may not be fully representative of our future earnings as we were not managing our insurance portfolio under IFRS 17
The fundamentals and strategies of our insurance business have not changed as a result of IFRS 17 adoption
Overview of IFRS 17 Changes
Contractual Service
Margin (CSM) and
New Business
Profits
Discount Rate on
Present Value
Insurance Contract
Liabilities
New business profits are deferred and measured as the contractual
service margin (CSM) liability and amortized into income as
insurance contract services are provided, while losses are recognized
into income immediately; under IFRS 4 both gains and losses were
recognized into income immediately
CSM liability is included in CET1 capital and related ratios
Discount rates used in calculating the present value of insurance
contract liabilities are based on the characteristics of the insurance
contracts; IFRS 4 was based on the assets supporting the liabilities
This change will impact the timing of investment-related income
and the associated market risk sensitivities
We have entered into economic hedging arrangements to offset the
impact of changes in interest rates on our earnings
Financial Statement Presentation Impacts
•
Non-interest Revenue includes:
Insurance service results:
includes insurance revenue, insurance
service expenses and reinsurance
results
Insurance investment results:
includes net returns on insurance-
related assets and the impact of the
change in discount rates and financial
assumptions on insurance contract
liabilities
We no longer report insurance claims,
commissions and changes in policy
benefit liabilities (CCPB)
Transition impacts:
•
Adoption of IFRS 17 resulted in an $1,075MM increase in assets, $2,181MM increase in liabilities, and $1,106MM after-tax decrease in
shareholders' equity as at November 1, 2022
On transition to IFRS 17, we voluntarily changed our accounting policy for the measurement of investment properties under IAS 40
Investment Property from cost to fair value and applied the change retrospectively, resulting in increases of $132MM in other assets,
and $132MM after-tax in shareholders' equity
Refer to Financial Statements Note 1: Basis of Presentation and section related to Insurance in the Risk Management section in the First Quarter 2024 Report to Shareholders for further information
BMOM
.
Financial Results ⚫ February 27, 2024
36View entire presentation