Item 7.01 Regulation FD Disclosure
The following information is furnished under Item 7.01 - Regulation FD
On December 22, 2017, the U.S. government enacted comprehensive tax legislation
commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The new law
makes broad and complex changes to the U.S. tax code and it will take time to
interpret the changes. Based on our current understanding of the law following a
preliminary review, we estimate significant impacts to our fourth quarter and
full year 2017 earnings, as well as future periods.
In particular, the transition to the new territorial tax system will cause us to
incur a deemed repatriation tax on undistributed earnings of certain non-U.S.
subsidiaries. In addition, the reduction of the U.S. corporate tax rate will
cause us to adjust our U.S. deferred tax assets and liabilities to the lower
base rate of 21 percent. We estimate the overall impacts of the Tax Act will
reduce earnings for the fourth quarter of 2017 by approximately $2.4 billion and
thus we expect to report a net loss for the fourth quarter of 2017. Due to the
impacts of the Tax Act, we expect full year 2017 earnings per share to be below
our $5.80 to $5.90 guidance range.
The impacts of the Tax Act in the fourth quarter will reduce our regulatory
capital and our capital ratios, although our capital ratios are expected to
remain well above all minimum regulatory capital requirements and the reduction
in the U.S. corporate tax rate increases our future capacity to generate
capital. We continued to repurchase shares during the fourth quarter, and will
assess any potential suspension, reductions or timing modifications to our share
repurchases during the first half of 2018 when we have fully interpreted the
impacts from the Tax Act.
While the Tax Act will negatively impact earnings in the fourth quarter of 2017,
the lower corporate rate is expected to be a significant ongoing benefit to
us. Beginning in 2018, we anticipate an effective tax rate in the low twenties
before discrete tax items.
We will announce financial results for the quarter and year ended December 31,
2017, on January 18, 2018.
Cautionary Note Regarding Forward-Looking Statements
This report includes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, which are subject to risks and
uncertainties. The forward-looking statements, which are based on currently
available information, contain words such as "believe," "expect," "estimate,"
"anticipate," "intend," "plan," "aim," "will," "may," "should," "could,"
"would," and similar expressions. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date on
which they are made. We undertake no obligation to update or revise any
forward-looking statements. Factors that could cause actual results to differ
materially from these forward-looking statements, include, but are not limited
to, the following:
· adjustments arising in the normal course of completing our fourth quarter and
year-end financial closing process, including calculations of year-end tax
balances and valuation assessments of the tax assets;
· our more comprehensive interpretation of the Tax Act, changes in
interpretations and assumptions we have made and actions we may take as a
result of the Tax Act;
· implementation of and guidance from the Internal Revenue Service, the Financial
Accounting Standards Board or others regarding the Tax Act, and any future
changes or amendments to that legislation;
· changes to factors, other than the federal corporate tax rate, that could
affect our tax provision and related effective tax rate, including, among other
things, our geographic mix of income, further changes in tax laws and
regulation and unfavorable tax audits and other unanticipated tax items; and
· changes affecting our ability or desire to return capital to shareholders
through share repurchases, which will depend on factors such as approval of our
capital plans by our primary regulators, the amount we spend on acquisitions of
companies and our results of operations and capital needs and economic
environment in any given period.
A further description of these and other risks and uncertainties can be found in
our Annual Report on Form 10-K for the year ended December 31, 2016, our
Quarterly Reports on Form 10-Q for the three months ended March 31, June 30 and
September 30, 2017, and our other reports filed with the SEC.
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