RBC expects to incur a charge of approximately $160 million pre-tax ($118 million post-tax) in its insurance segment as a result of proposed legislation brought forward in Budget 2013.
This new legislation, Bill C-4, was tabled in the House of Commons for first reading on October 22, 2013. If passed, it would affect the tax treatment of certain individual life insurance policies.
That impact would be reflected in the bank’s Q4 2013 earnings, which will be released on December 4, 2013.
Under Canadian International Financial Reporting Standards (IFRS), the present values of the expected profits for life policies are recognized at the time of sale of those policies.
The bank’s current life insurance policies were primarily sold through third-party brokers, and RBC is working with those brokers to ensure potentially affected clients understand their choices in light of proposed tax legislation. Clients will be offered revised options.
The expected profit on affected and amended policies would be lower than their previous expected profits due to potential increases to benefits, claims and acquisition expenses.