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) - October 26, 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 October 26, 1998, HSB Group, Inc. (the "Company") issued a press release
reporting its third quarter earnings. Included herewith as Exhibit 99 is the
Company's press release related to this announcement and such information is
incorporated herein by reference.
Item 7. Exhibits.
99. Press release dated October 26, 1998 announcing third quarter results.
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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: October 26, 1998 /s/ R. Kevin Price
R. Kevin Price
Senior Vice President
and Corporate Secretary
Exhibit 99
CONTACT:
James C. Rowan Jr.
Office: (860) 722-5180
FOR IMMEDIATE RELEASE
HSB GROUP, INC. REPORTS GAINS IN THIRD QUARTER
HARTFORD, Conn., October 26, 1998 -- HSB Group, Inc. (NYSE-HSB), today reported
that the third quarter net income per share on a fully diluted basis, was 72
cents. This represents an increase of 41.2 percent, compared to 51 cents per
share over the third quarter of 1997.
HSB Group's gross earned insurance premiums grew 40.2 percent. The expense ratio
declined to 43.5 percent from 47.4 percent for the third quarter of 1997. The
combined ratio -- the sum of losses and expenses as a percentage of insurance
revenue -- was 87.9 percent down from 92 percent last year.
HSB's Engineering Services revenues increased 63 percent over the third quarter
of 1997. The operating margin was 7.6 percent.
Income from investment operations was $23.4 million compared to $11.4 million in
the third quarter of 1997. Year-to-date realized gains are $18.4 million.
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"Our earnings performance confirms that we have successfully positioned HSB for
profitable growth in all of our businesses," said Gordon W. Kreh, chairman of
the board, president and chief executive officer.
HSB Group, Inc. is a global provider of insurance products and engineering
management consulting services. HSB Group is the parent company of The Hartford
Steam Boiler Inspection and Insurance Company, founded in 1866 to provide loss
prevention service and insurance to businesses, industries and institutions. For
more information about HSB, visit its website at www.hsb.com.
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Summary of Operations
In millions, except per share amounts
<TABLE>
<CAPTION>
Quarter Year-To-Date
Ended September 30 Percent September 30 Percent
1998 1997 Change 1998 1997 Change
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross earned premium $ 212.5 $ 151.6 40.2% $ 567.8 $ 456.6 24.4%
Reinsurance 113.0 30.3 278.5 95.7
------- ------- ------- -------
Net earned premium 99.5 121.3 289.3 360.9
Claims and adjustment expenses 44.2 54.1 129.1 157.0
Policy acquisition expenses 18.0 23.5 45.3 67.5
Underwriting and inspection expenses 26.4 34.2 83.5 105.5
------- ------- ------- -------
Insurance operating gain $ 10.9 $ 9.5 $ 31.4 $ 30.9
------- ------- ------- -------
Loss ratio 44.4% 44.6% 44.6% 43.5%
Expense ratio* 43.5% 47.4% 44.1% 47.8%
Combined ratio* 87.9% 92.0% 88.7% 91.3%
Engineering services revenues $ 25.3 $ 15.5 63.0% $ 67.7 $ 45.2 49.6%
Engineering services expenses 23.4 14.5 62.1 42.3
------- ------- ------- -------
Engineering services operating gain $ 1.9 $ 1.0 $ 5.6 $ 2.9
------- ------- ------- -------
Engineering services operating margin 7.6% 6.3% 8.3% 6.5%
Investment income, net of related interest expense $ 15.5 $ 9.1 69.7% $ 46.6 $ 25.8 80.9%
Realized investment gains 7.9 2.3 18.4 6.2
------- ------- ------- -------
Income from investment operations $ 23.4 $ 11.4 $ 65.0 $ 32.0
Interest expense 0.2 0.4 0.5 0.9
Gain on sale of IRI - - 39.0 -
Income from continuing operations before income taxes
and distributions on capital securities $ 36.0 $ 21.5 $ 140.5 $ 64.9
Income taxes 9.3 5.3 41.1 16.5
Distribution on capital securities of subsidiary trusts,
net of tax 4.6 1.0 13.8 1.0
------- ------- ------- -------
Income from continuing operations $ 22.1 $ 15.2 $ 85.6 $ 47.4
Discontinued operations:
After tax gain on disposal of Radian International LLC,
net of deferred loss of $6.6 million - - 30.3 -
----- ----- ------- -----
Net income $ 22.1 $ 15.2 $ 115.9 $ 47.4
======= ======= ======= =======
Earnings per share-assuming dilution:
Income from continuing operations $ 0.72 $ 0.51 41.2% $ 2.71 $ 1.56 73.7%
Net income $ 0.72 $ 0.51 41.2% $ 3.57 $ 1.56 128.8%
Dividends declared per common share $ 0.42 $ 0.38 $ 1.22 $ 1.16
Average common shares outstanding and common stock
equivalents 35.3 29.9 35.3 30.2
</TABLE>
*Excludes goodwill amortization related to EIG.
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Summary of Financial Position
In millions, except per share amounts
<TABLE>
<CAPTION>
Percent
September 30, 1998 December 31, 1997 Change
------------------ ----------------- -------
<S> <C> <C> <C>
Assets
Cash and short-term investments $ 104.2 $ 424.5
Fixed maturities, at fair value 555.9 248.4
Equity securities, at fair value 409.4 323.8
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Cash and invested assets 1,069.5 996.7
Reinsurance assets 531.0 124.5
Insurance premiums receivable 155.1 138.0
Engineering services receivable 26.9 12.2
Fixed assets 42.8 36.4
Investment in Radian - 83.4
Other assets 219.3 149.0
--------- ---------
Total assets $ 2,044.6 $ 1,540.2 32.7%
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Liabilities
Unearned - insurance premiums and ceding commissions $ 473.6 $ 290.3
Claims and adjustment expenses 458.2 276.7
Total borrowings 29.5 67.5
Other liabilities 261.1 151.5
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Total liabilities 1,222.4 786.0
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 convertible
capital securities of subsidiary Trust II holding solely
junior subordinated deferrable interest debentures
of the Company 300.0 300.0
Shareholders' equity 413.3 345.3
--------- ---------
Total $ 2,044.6 $ 1,540.2
========= =========
Shareholders' equity per common share $ 14.08 $ 11.75 19.8%
Based on common shares outstanding of 29.4 29.4
Pro forma shareholders' equity per common share
assuming conversion of Trust II capital securities
and net exercise of in the money HSB stock options $ 20.33 $ 18.46
Based on pro forma common shares outstanding 35.1 35.0
</TABLE>
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