Insurance Stock Q3 Earnings Slated On Nov 4: BRK.B, WLTW, ENH

The Q3 earnings season is well underway with 72.8% of the S&P 500 Index members having reported their quarterly results so far. According to our latest Earnings Preview report, the performance of the 364 index members (accounting for 72.6% of the index’s total market capitalization) that have already reported their financial numbers this quarter indicate that both total earnings and revenue improved 1.6%. The beat ratio is strong with 72.3% companies surpassing bottom-line expectations and 54.7% outperforming on the top-line front.

The Finance sector (one of the 16 Zacks sectors) started the Q3 earnings season on a strong note. In fact, the financial performance of 88.9% companies from this sector that have revealed their quarterly results indicates 11.3% earnings growth due to a 6.0% increase in revenues, both on a year-over-year basis. Moreover, the beat ratios of 72.5% for the bottom line and 73.8% for the top line compare favorably with the S&P 500.

The Finance sector is highly diversified and includes several industries like insurance, banks and securities exchanges to name a few.

A benign catastrophe environment in Q3 supported the improvement in underwriting results. Lesser cat events favored capital gains and reserve release. Exposure to key areas of the economy, such as new vehicle sales and construction, is expected to have benefitted the property and casualty (P&C) insurers.

Riding on the strength of their core business, geographic expansion and strategic acquisitions, several insurers are poised to outperform in the quarter. Better payroll and employment scenario should also benefit these companies.

Companies that are skewed toward providing health benefits may gain from expansion of the Affordable Care Act, while improvement in the housing market should support mortgage insurers. On the other hand, improving healthcare and benefits consulting service should boost the top-line growth of insurance brokers.

However, a soft interest rate environment continues to weigh on investment results. Nonetheless, spread compression on products like fixed annuities and universal life should improve.

With a number of companies set to report their Q3 results soon, we expect to get a clearer idea about the trends of this earnings cycle. Meanwhile, let’s find out how these three insurers might perform when they report their quarterly numbers on Nov 4.

Berkshire Hathaway (NYSE:BRKa) Inc. BRK.B is a holding company, which owns nearly 80 operating units in insurance, rail roads, utilities, manufacturing services, retail and home building. The company delivered a positive surprise of 1.63% in the last quarter. According to our quantitative model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) – to increase its odds of an earnings surprise. Berkshire Hathaway has a Zacks Rank #3 but an Earnings ESP of 0.00% makes surprise prediction difficult. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises..

The Zacks Consensus Estimate for Q3 is pegged at $1.88 per share.

Berkshire Hathaway’s strategic acquisitions should have a positive impact on the operational results. Core strength of its segments should drive top line. However, Berkshire Hathaway incurred high expenses due to rail road operations in the quarter. This is likely to weigh on margin expansion. (Read more: Berkshire Hathaway Q3 Earnings: What's in Store? )

With respect to the surprise trend, Berkshire Hathaway missed expectations in two of the last four quarters, with an average miss of 1.54%.

Willis Towers Watson plc (NASDAQ:WLTW) is a leading global advisory, broking and solutions company. The company caters to large companies and mid-market and small businesses across the world. The company delivered a positive surprise of 4.40% in the last quarter. The company’s has an Earnings ESP of -5.83%, which makes surprise prediction difficult in spite of its favorable Zacks Rank #3. You can see the complete list of today’s Zacks Rank #1 stocks here.

The Zacks Consensus Estimate for Q3 is pegged at $1.03 per share.

Willis Towers’ core strengths as well as strategic acquisitions should support top-line improvement. Costs and tax synergies should also support results. The compnay is expected to have incurred higher operating expenses interest expenses, weighing on margin exaamion. (Read more: Willis Towers: What's in Store this Earnings Season?)

With respect to the surprise trend, Willis Towers lagged expectations in two of the last four quarters with an average miss was 3.57%.

Endurance Specialty Holdings Ltd. (NYSE:ENH) is an underwriter of specialty lines of personal and commercial property and casualty insurance and reinsurance, worldwide. The company posted a negative surprise of 29.57% in the last quarter. The company’s Zacks Rank #5 (Strong Sell) and an Earnings ESP of -9.04% makes surprise prediction difficult. Please note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement.

The Zacks Consensus Estimate for Q3 is pegged at $1.77 per share.

With respect to the surprise trend, Endurance Specialty beat expectations in two of the last four quarters with an average beat of 11.59%.

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