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RSA Insurance Group plc Lashed By Storm Warning

The shares of RSA Insurance (LSE: RSA) sank 8p, or 6%, to 121p during early trade this morning after the insurer owned up to higher-than-expected claims due to bad weather.

RSA said last week’s storm and continuing adverse weather in Canada had meant the group’s return on equity would now be below 10% for 2013.

The FTSE 100 member had said previously that it expected its return on equity for this year to be between 10% and 12%.

RSA reckoned the storm that hit the UK and Europe last week would result in a net loss of between £45m and £65m across the company’s UK, Scandinavia and Baltic operations.

RSA said wind speeds last week hit 110mph in Denmark and caused “an exceptionally high level of roof damage“.

The company also revealed net written premiums during the first nine months of the year had climbed 8% to £6.7bn. Premiums in the UK and western Europe advanced 4%, while Canada showed 14% growth and Scandinavia reported a 6% gain.

Simon Lee, RSA’s chief executive, said:

2013 is proving to be an exceptionally tough year for weather events for the Group. Over the summer we saw the worst and the third worst natural catastrophe insurance events on record in Canada, followed by continued adverse weather across the country during the third quarter. More recently, Northern Europe suffered a severe windstorm on 27 and 28 October.

Prior to today, City experts had been expecting RSA’s 2013 results to show earnings of 12p per share and a dividend of 6.3p per share.

Following this morning’s price movement, the shares may be valued at 10 times profits and offer a yield in excess of 5%.

Of course, whether those ratings, the cost of roof repairs in Denmark, as well as the broader prospects for the insurance sector all combine to make RSA a 'buy' right now is something only you can decide.

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> Maynard does not own any share mentioned in this article.