SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - April 21, 1998
HSB GROUP, INC.
(Exact name of registrant as specified in its charter)
Connecticut 001-13135 06-1475343
(State or other (Commission (IRS Employer
jurisdiction of incorporation) File Number) Identification No.)
One State Street, Hartford, Connecticut 06102-5024
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - (860-722-1866)
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Item 5. Other Events
On April 21, 1998, HSB Group Inc. (the Company) issued press releases announcing
first quarter results, a three-for-two stock split, the declaration of a
quarterly dividend to be payable July 30, 1998, and a summary of the Company's
annual meeting held on April 21, 1998, including the announcement of the
retirement from the Board of Directors of Wilson Wilde and John M. Washburn, Jr.
Included herewith as Exhibits 99.1 through 99.3 are the Company's press releases
related to these announcements and such information is incorporated herein by
reference.
Item 7. Exhibits.
99.1 through 99.3: The Company's press releases dated April 21, 1998.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HSB GROUP, INC.
Dated: April 21, 1998 /s/ R. Kevin Price
R. Kevin Price
Senior Vice President and
Corporate Secretary
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Exhibit 99.1
CONTACT:
James C. Rowan Jr.
Office: (860) 722-5180
FOR IMMEDIATE RELEASE
HSB GROUP, INC. REPORTS GAINS IN FIRST QUARTER
HARTFORD, Conn., April 21, 1998 -- HSB Group, Inc. (NYSE-HSB), today reported
that first quarter net income per share on a fully diluted basis, before gains
from sales of the company's interests in Industrial Risk Insurers and Radian
International LLC, was 89 cents. This represents an increase of 14.1 percent,
compared to 78 cents per share in the first quarter of 1997. Including the gains
from the sales, net income per share on a fully diluted basis for the quarter
was $3.26.
HSB Group's gross earned insurance premiums grew 16.7 percent. The expense ratio
declined to 45.1 percent from 47.9 percent for the first quarter of 1997. The
combined ratio -- the sum of losses and expenses as a percentage of insurance
revenue -- was 89 percent compared to 90 percent last year.
"In our insurance business, the impact of the January ice storm-related losses
in Canada was partially offset by excellent results in our domestic business,"
said Gordon W. Kreh, President and Chief Executive Officer.
HSB's Engineering Services net revenues increased 19.9 percent over the first
quarter of 1997. The margin improved to 8.4 percent.
Income from investment operations was $18.4 million compared to $8.5 million in
the first quarter of 1997. The increase reflects good performance in the
portfolio and additional investable funds resulting from the Industrial Risk
Insurers and Radian sales and issuance during 1997 of Capital Securities, which
bear a carrying cost of approximately $7 million per quarter. Realized gains of
9 cents per share (as compared to 2 cents in 1997) were primarily the result of
calls on fixed income investments.
HSB Group, Inc. is a global provider of insurance products and engineering
management consulting services. HSB is the parent company of The Hartford Steam
Boiler Inspection and Insurance Company, founded in 1866 and the largest
provider of equipment breakdown insurance in the world.
Summary of Operations
In millions, except per share amounts
<TABLE>
Quarter
Ended March 31 Percent
1998 1997** Change
------ ------
<S> <C> <C> <C>
Gross earned premium.......................................... $ 181.7 $ 155.7 16.7%
Reinsurance................................................... 80.2 33.4
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Net earned premium......................................... $ 101.5 $ 122.3
Claims and adjustment expenses................................ 44.6 51.5
Policy acquisition expenses................................... 12.6 23.5
Underwriting and inspection expenses.......................... 33.5 35.3
------- -------
Insurance operating gain................................... $ 10.8 $ 12.0
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Loss ratio............................................... 43.9% 42.1%
Expense ratio*........................................... 45.1% 47.9%
Combined ratio*.......................................... 89.0% 90.0%
Engineering services revenues................................. $ 17.6 $ 14.7 19.9%
Engineering services expenses................................. 16.1 13.6
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Engineering services operating gain........................ $ 1.5 $ 1.1
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Engineering services operating margin.................... 8.4% 7.1%
Investment income, net of related interest expense............ $ 15.2 $ 8.0 90.0%
Realized investment gains..................................... 3.2 0.5
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Income from investment operations.......................... $ 18.4 $ 8.5
Interest expense.............................................. 0.1 0.2
Gain on sale of IRI........................................... 39.0 -
Income from continuing operations before income taxes and
distributions on capital securities $ 69.6 $ 21.4
Income taxes.................................................. 22.5 5.5
Distribution on capital securities of subsidiary trusts,
net of tax................ 4.5 -
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Income from continuing operations............................. $ 42.6 $ 15.9
Discontinued operations:
After tax gain on disposal of Radian International LLC, net of
deferred loss of $6.6 million 30.3 -
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Net income.................................................... $ 72.9 $ 15.9
======= =======
Earnings per share-assuming dilution:
Income from continuing operations.......................... $ 1.96*** $ 0.78 151.3%
Net income................................................. $ 3.26 $ 0.78 317.9%
Dividends declared per common share........................... $ 0.60 $ 0.57
Average common shares outstanding and common stock equivalents 23.4 20.5
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* 1998 and 1997 exclude goodwill amortization related to EIG
** Restated for the effects of discontinued operations.
*** Includes $1.07 earnings per share - assuming dilution for gain
on sale of IRI.
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Summary of Financial Position
In millions, except per share amounts
<TABLE>
Percent
March 31, 1998 December 31, 1997 Change
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<S> <C> <C> <C>
Assets
Cash and short-term investments........................ $ 167.7 $ 424.5
Fixed maturities, at fair value........................ 538.5 248.4
Equity securities, at fair value....................... 441.1 323.8
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Cash and invested assets............................ 1,147.3 996.7
Insurance premiums receivable.......................... 192.7 138.0
Engineering services receivable........................ 14.4 12.2
Fixed assets........................................... 37.5 36.4
Investment in Radian................................... - 83.4
Reinsurance assets..................................... 307.1 124.5
Other assets........................................... 172.5 149.0
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Total assets........................................ $ 1,871.5 $ 1,540.2 21.5%
========= =========
Liabilities
Unearned premiums...................................... $ 467.6 $ 290.3
Claims and adjustment expenses......................... 296.7 276.7
Total borrowings....................................... 26.0 67.5
Other liabilities...................................... 261.0 151.5
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Total liabilities................................... 1,051.3 786.0
Company obligated mandatorily redeemable capital
securities of subsidiary Trust I holding solely
junior subordinated deferrable interest
debentures of the Company, net of unamortized discount. 108.9 108.9
Company obligated mandatorily redeemable capital
securities of subsidiary Trust II holding solely
junior subordinated deferrable interest
debentures of the Company.............................. 300.0 300.0
Shareholders' equity...................................... 411.3 345.3
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Total.................................................. $ 1,871.5 $ 1,540.2
========= =========
Shareholders' equity per common share..................... $ 21.18 $ 17.63 20.1%
Based on common shares outstanding of..................... 19.4 19.6
Proforma shareholders' equity per common share
assuming conversion of Trust II capital securities
and net exercise of in the money HSB stock options....... $ 30.38 $ 27.69
Based on pro forma common shares outstanding.............. 23.4 23.3
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</TABLE>
Exhibit 99.2
MEDIA CONTACT:
James C. Rowan
Office: (860) 722-5180
FOR IMMEDIATE RELEASE
HSB GROUP ANNOUNCES STOCK SPLIT AND DECLARES DIVIDEND
HARTFORD, Conn., April 21, 1998 -- HSB Group, Inc.'s (NYSE: HSB) Board of
Directors today approved a three-for-two stock split for shares held of record
on May 1, 1998. Additional shares resulting from the split will be distributed
on or about May 22, 1998.
In addition, the company declared a regular quarterly dividend of 40 cents per
share (post split), payable July 30, 1998, to shareholders of record on July 10,
1998.
HSB Group, Inc. (HSB) is a global provider of insurance products and engineering
management consulting services. HSB is the parent company of The Hartford Steam
Boiler Inspection and Insurance Company, founded in 1866 and the largest
provider of equipment breakdown insurance in the world.
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Exhibit 99.3
MEDIA CONTACT:
James C. Rowan
Office: (860) 722-5180
FOR IMMEDIATE RELEASE
HSB GROUP, INC. HOLDS ANNUAL MEETING
HARTFORD, Conn., April 21, 1998 -- HSB Group, Inc. (NYSE: HSB), at its annual
meeting held today at the company's headquarters, announced strong results for
1997 and a positive outlook for continued growth in 1998.
President and Chief Executive Officer Gordon W. Kreh called 1997 a good year for
HSB. "All of the company's businesses experienced growth. Net income per share
was $3.29, compared to $2.65 in 1996 -- a 24.1 percent increase. These results
confirm that our growth strategy is working."
Gross earned premium grew to $609.3 million, an increase of 9.5 percent over
1996. This reflects growth in the company's North American client company
business; increased participation in Industrial Risk Insurers (IRI), a pool for
highly protected risks; and international growth through HSB Engineering
Insurance Limited, the company's London-based subsidiary that serves customers
outside the United States and Canada.
Kreh stated that the company's combined ratio -- the sum of losses and expenses
expressed as a percentage of insurance revenue -- was 91.7 percent, compared to
the industry average of 102.2 percent.
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Income from investment operations was $50.9 million, an increase of 14.6 percent
over 1996.
During the meeting, shareholders elected three directors for three-year terms,
approved a proposal to amend and restate the short-term and long-term incentive
plans, and appointed independent public accountants.
Elected to three-year terms on the board of directors were: Richard H. Booth,
executive vice president of strategic development at Phoenix Home Life Mutual
Insurance Company; Colin G. Campbell, president of the Rockefeller Brothers
Fund; and Simon W. Leathes, chief executive officer of Hambros PLC.
President Kreh recognized Wilson Wilde, former chairman and CEO, who retired
after serving on the board since 1967. Kreh also announced the board's decision
to name Wilde Chairman Emeritus. In addition, Kreh acknowledged John M. Washburn
Jr. who retired from the board after 25 years of service as a director. Washburn
served as president of The Merrow Machine Company, a manufacturer of industrial
sewing machines, until his retirement in 1995.
At the meeting, Kreh reviewed significant highlights of 1997: A new holding
company -- HSB Group, Inc. -- was formed to provide greater operating and
financial flexibility. HSB announced its intentions to sell its interest in
Radian International LLC to the Dow Chemical Company. That sale was completed in
January 1998. In addition, the company increased its capital base through the
sale of $110 million of 30-year, floating rate capital securities and through
the issuance of $300 million in convertible subordinated capital securities to
Employers Reinsurance Corporation (ERC), an affiliate of GE Capital Services.
The company also arranged for the sale in January 1998 of its interest in
Industrial Risk Insurers to ERC.
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Looking ahead, President Kreh said, "HSB has a strong foundation for profitable
growth and increased shareholder value. We are confident that our growth in
revenue will continue through this year and beyond. We are well positioned as an
engineering management consulting firm."
HSB's greatest opportunity for domestic growth is through its relationships with
other property-casualty insurers it calls `client companies.' Through special
reinsurance agreements, HSB integrates equipment breakdown coverage into client
companies' policies. "Organizations are increasingly relying on costly equipment
and sensitive new technologies. The types of machinery and equipment we cover
are vital to their operations. This environment presents a tremendous
opportunity. And, we are aggressively pursuing it," Kreh said.
The outlook for continued international growth for HSB is excellent. HSB
Engineering Insurance Limited will capitalize on opportunities in power
generation and other heavy industries and other businesses.
Kreh projected Engineering Services' growth would continue, particularly in the
reliability consulting services provided through HSB Reliability Technologies.
HSB Group, Inc. is a global provider of insurance products and engineering
management consulting services. HSB is the parent company of The Hartford Steam
Boiler Inspection and Insurance Company, founded in 1866 and the largest
provider of equipment breakdown insurance in the world.
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