Zurich, Allianz, and Munich could see significant increases to net profit from the U.S. corporate tax rate cut from 35% to 20%, according to JP Morgan.
Analysts estimate the potential uplift to net profit at 6-8% for Zurich – which has the largest U.S. exposure from U.S. subsidiaries – 5% for Allianz, and 3% for Munich.
The excise tax could potentially also lead to a change in Zurich’s internal capital allocation as it could make the allocation of capital using internal reinsurance more costly.
Reducing the tax from 35% to 20% is a 15% benefit, JP Morgan said; “In terms of the group’s 2018 Bloomberg consensus net profit of €2475m this is 3% more net profit.
“There is no DTA position so there is no first year adjustment. So the 3% benefit is from the first full year the lower tax is in force, potentially 2018.”
The one off from the adjustment of the balance sheet deferred tax asset / liability to the lower tax rate is expected to be neutral for Munich, negative for Allianz, and positive for Zurich.
However, the proposals on excise tax on offshore reinsurance premiums are still awaiting finalisation.
