CIBC cuts back on insurance

In a move towards cutting $500 million out of its operating expenses, CIBC recently announced it was cutting 4200 jobs, roughly 10% of its entire workforce. While the bank will not release figures on the jobs being cut — maintaining they are across the board — CIBC sources have indicated an internal memo announced CIBC Insurance will close branches in western Canada and the Halifax office, continuing to operate in only Toronto, Ottawa, Montreal and Calgary.

Susan McDougall, CIBC communications, confirms the existence of the memo but clarifies the organization is not pulling out of the rest of Canada, but is consolidating service offices in the four locations. “We will continue to service and sell property & casualty insurance products to consumers nationwide,” she maintains.

The announced cuts and scaling back of insurance offices comes as no surprise for market observers who note CIBC’s insurance operation has been in disarray for the past year. In mid-1999, the industry was flooded with rumours the bank had put its insurance operation on the block with Berkshire Hathaway subsidiary U.S.-based GEICO Insurance said to be an eager suitor. All this, despite the carriers strong results in 1998 in which direct written premiums rose 11%, to $306.5 million, over the previous year. “CIBC has never been comfortable in the insurance game and despite a strong book of business, problems have marred them since day one,” says one market observer.

Already, in its fourth quarter 1999 report, CIBC has announced that despite year-end profits of $1.03 billion, the company is exiting non-branch real estate operations, the manufacturing of direct life insurance and certain CIBC World Market’s Asian and European operations. CEO John Hunkin notes the move is to concentrate operations on core competencies.