Hartford, Conn.-based The Hartford and New York City-headquartered Travelers confirmed they are among several companies giving their employees bonuses of $1,000 each if they earn $75,000 or less annually as a result of what U.S. Treasury Secretary Steven T. Mnuchin has called “the most significant tax cuts and reform package in over three decades.”
“We wanted to ensure that some of the benefit from the recently passed tax legislation would also go directly and immediately to those employees who are primarily on the front-line, serving our customers every day,” Marty Gervasi, head of human resources at The Hartford, told Insurance Journal in an emailed statement.
This comes after U.S. President Donald Trump signed the Tax Cuts & Jobs Act into law on December 22. The law provides large tax cuts for corporations and affluent Americans and smaller cuts for middle class and low-income American families, PBS reported, adding it is the first major overhaul of the nation’s tax laws since 1986.
Under the legislation, insurers, agencies and other businesses organized as C corporations will see their statutory tax rate slashed from a top rate of 35 percent to 21 percent starting next month, as previously reported by Insurance Journal.
Mnuchin announced in a public statement that more than one million American workers are receiving special bonuses in response to President Trump signing the Act, adding that “this is only the beginning.”
“American workers will see bigger paychecks soon and keep more of their hard-earned money,” he stated. “Our economy will continue to grow faster than it has in many years…”
The New York Times reports that AT&T, Southwest Airlines, Comcast and American Airlines are among additional companies offering $1,000 bonuses to some employees.
While Insurance Journal previously reported that many in the property and casualty insurance industry expressed positivity about the outcome of the Tax Cuts & Jobs Act, some had mixed feelings regarding potential changes that could take place as a result.
Indeed, The National Association of Professional Insurance Agents (PIA) said in a published statement that although the Act will be overall positive for most PIA members, it could leave smaller businesses at a disadvantage.
“While the bill provides provisions that will result in savings for some pass-through entities, the benefit is limited by an income threshold that will prevent some PIA members from benefitting from the maximum new deduction available to certain pass-throughs,” PIA stated. “As such, many may opt to reorganize as C corporations, a process that costs money and presents logistical and compliance issues that could be overly burdensome to small businesses. Furthermore, the benefit for pass-throughs, even at its most generous, is not permanent, which leaves small business owners at a disadvantage compared to large corporations.”
Rating agency A.M. Best also stated in a briefing that although the insurance industry will see overall benefits from the reduced corporate tax rate, certain revenue enhancements could impact life and property and casualty insurers.
“In particular, a repeal of all net operating loss carrybacks could reduce total adjusted and risk-based capital for life insurers,” A.M. Best stated. “For life insurers, the repeal of the loss carryback period has the potential to reduce the amount of gross deferred tax assets that can be admitted, thereby reducing capital and surplus. Higher after-tax earnings may offset the surplus declines, but this may take time to emerge. A.M. Best will view companies on a case-by-case basis to determine future surplus expectations as the new law takes effect.”
With this in mind, S&P Global Ratings credit analyst Deep Banerjee stated in a release that U.S. insurers will need to be “nimble” as they adapt to the new regime, with the impact on individual company ratings still to be determined.
“Although we don’t expect immediate rating changes, the manner in which U.S. insurers adjust to the tax code revisions will determine the longer-term impact on individual company ratings,” Banerjee stated.