Credit Suisse Weighs in on Obama Budget

The insurance revenue raisers in the Obama 2012 budget proposal law are unlikely to become law, but, if they do, they could cause a noticeable hit to some insurers’ earnings, securities analysts say.

The analysts, at Credit Suisse Securities (USA) L.L.C., New York, say they think a proposed dividends-received deduction (DRD) change could cut earnings as much as 10% at one large, publicly traded insurer, and that another proposal, to change the treatment of corporate-owned life insurance (COLI) policies, could cut earnings between 1% and 5% at two large, publicly traded insurers.

Federal fiscal year 2012 starts Oct. 1.

The Obama administration’s fiscal year 2012 budget proposal calls for the government to spend $3.7 trillion in 2012 and generate a $1 trillion deficit.

The DRD provision in the proposal would reduce a deduction that life insurers use to protect themselves against double taxation on dividend income.

Another “revenue raiser” provision would expand the