July 1, 2000 by Canadian Underwriter
Following several months of rumor that the Canadian Imperial Bank of Commerce (CIBC) was looking for an exit strategy in divesting from its less-than-profitable property and casualty insurance interests, the bank appears to have finally found a taker — for $330 million.
Quebec-based financial services group Desjardins Laurentian Financial Corporation has snapped up CIBC’s The Personal Insurance Co. of Canada and CIBC General Insurance Co. in a deal valued at approximately 1.5 times the book value of the insurance operations in question. The deal is subject to final regulatory approval.
Desjardins Laurentian holds extensive banking and life insurance interests, including Imperial Life. Commenting on the deal with CIBC, Desjardins Laurentian chairman Alban D’Amours says the p&c interests acquired from the bank are “perfect vehicles” enabling the group to expand its business outside of Quebec.
CIBC Insurance chief executive officer Kenn Lalonde issued a brief statement, “This agreement marks another step in CIBC’s strategy to focus our investments and growth in those areas that we believe will deliver the greatest return to our shareholders.” CIBC will continue to distribute and market third-party creditor and travel medical insurance through its branches.
The two CIBC insurance operations acquired by Desjardins Laurentian account for roughly 400,000 policies in force with an annual premium volume of $300 million. The annual operating expense of the two companies is said to be about $90 million. The announcement of the deal sparked market speculation that the “big banks” have finally thrown in the towel in convincing Ottawa to deregulate the selling of insurance and the ownership of insurance companies. The Royal Bank recently announced its biggest foreign bid of $1 billion for U.S-based Liberty Life Insurance group. U.S. financial services regulation was recently opened up allowing for cross-ownership between institutions of the different sectors. “The recent activity of the large bank groups does seem to indicate that they are backing away from further expansion in the Canadian insurance markets,” observes a marketwatcher.