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Morgan Stanley: An Insurance Tax Reform Perspective

Posted By Administration, Tuesday, January 16, 2018

The impact of the now-called Trump tax cuts is still being analyzed. For insurance, it will likely be a good thing and with the pass-through income changes, a huge percentage of independent insurance agents will benefit. While some states are still complaining about the income tax and other local tax deduction limits, the states will also — say tax experts — see a windfall of income.

Morgan Stanley says the tax reforms and the lower corporate tax rate will benefit most property and casualty insurers. The company predicts insurance companies will see domestic earnings grow by an average of 14% this year.

In its research paper, Morgan Stanley said the biggest beneficiaries will be larger insurers like AIG, W.R. Berkley, Brown & Brown, Progressive and Allstate. They — like many corporations — had been paying taxes in the low 30% range. Now it’s dropping to — on paper — 21%.

The report says more than likely what they’ll pay is between 16% and 25% and outlined a couple of nuances that will affect the insurers:

  W.R. Berkley’s book value will grow by 11% or more because of a $35 billion benefit

  AIG — on the other hand — will likely be hit by a $7 billion tax bill or 10% of book value

  The Hartford will take a 5% hit or 5% of its book value

  The Hartford also will see an $850 million reduction in its financial results due to the new law on deferred tax assets


The new tax law could also impact earnings if companies decide to reinvest or “share the wealth.” That translates to companies reinvesting to doing things like “hiring talent, improving platforms or sharing with customers in the form of lower pricing.”

That could end up eroding potential earnings.


Source link: Carrier Management

Tags:  Insurance Content  Insurance Industry  Morgan Stanley: An Insurance Tax Reform Perspectiv 

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