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 25, 1999
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)
<PAGE>
Item 5. Other Events
On October 25, 1999, 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 25, 1999 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: /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 THIRD QUARTER RESULTS
HARTFORD, Conn., October 25, 1999 -- HSB Group, Inc. (NYSE-HSB) today reported
that third quarter net income per share on a fully diluted basis was 64 cents.
This compares to 72 cents per share in the third quarter of 1998. The quarter's
results were impacted by $10 million in losses from weather-related events
domestically and the Taiwan earthquake.
HSB Group's gross earned insurance premiums declined 5.6 percent from the third
quarter last year reflecting the company's refusal to write large risk business
that does not provide sufficient opportunity to earn an underwriting profit. The
company's commercial reinsurance business continues to grow at double-digit
rates. HSB's insurance operations remained profitable for the quarter, despite
the weather and earthquake-related losses. The combined ratio -- the sum of
losses and expenses as a percentage of insurance revenue -- was 97.7 percent for
the quarter, up from 88.9 percent in the third quarter of 1998. The year-to-date
combined ratio is 91.5 percent.
HSB's Engineering Services net revenues increased 20.9 percent over the third
quarter of 1998. The margin was 3.6 percent, reflecting investments in the
growth of the business. Year-to-date, the Engineering Services margin is 6.6
percent.
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Investment income, net of related interest expense, was $16.5 million compared
to $15.5 million in the third quarter of 1998. Realized gains were $13.5 million
for the third quarter of 1999.
"Overall, we remain positive about the prospects for our business. There are
clear indications of selective improvements in the insurance pricing
environment. Our engineering services businesses continue to grow and our
investment portfolio continues to perform well," said Gordon W. Kreh, chairman,
president and chief executive officer.
HSB Group, Inc. (NYSE-HSB), the parent company of The Hartford Steam Boiler
Inspection and Insurance Company, is a global provider of specialty insurance
products, engineering services, and management consulting. The Hartford Steam
Boiler Inspection and Insurance Company was founded in 1866 to provide loss
prevention service and insurance to businesses, industries and institutions. For
more information about HSB, visit its web site 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
1999 1998 Change 1999 1998 Change
- --------------------------------------------- ----------- ------------ ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gross earned premiums $200.6 $212.5 -5.6% $616.3 $567.9 8.5%
Ceded premiums 107.9 113.0 333.4 278.6
------- ------- -------- -------
Insurance premiums $ 92.7 $ 99.5 $282.9 $289.3
Claims and adjustment expenses 44.5 44.2 120.7 129.1
Policy acquisition expenses 21.6 17.9 65.5 45.3
Underwriting and inspection expenses 24.4 26.4 72.6 83.5
------- ------- -------- -------
Insurance operating gain $ 2.2 $ 11.0 $ 24.1 $ 31.4
------- ------- -------- -------
Loss ratio* 48.1% 44.4% 42.7% 44.6%
Expense ratio* 49.6% 44.5% 48.8% 44.6%
Combined ratio* 97.7% 88.9% 91.5% 89.2%
Engineering services revenues $ 30.6 $ 25.3 20.9% $ 86.0 $ 67.7 27.0%
Engineering services expenses 29.5 23.4 80.3 62.1
------- ------- -------- -------
Engineering services operating gain $ 1.1 $ 1.9 $ 5.7 $ 5.6
------- ------- -------- -------
Engineering services operating margin* 3.6% 7.4% 6.6% 8.3%
Investment income, net of related interest
expense $ 16.5 $ 15.5 6.5% $ 48.8 $ 46.6 4.7%
Realized investment gains 13.5 7.9 30.8 18.4
------- ------- -------- -------
Income from investment operations $ 30.0 $ 23.4 $ 79.6 $ 65.0
Interest expense 0.6 0.2 1.6 0.5
Gain on sale of IRI - - - 39.0
Income from continuing operations before
income taxes and distributions on
capital securities $ 32.7 $ 36.1 $107.8 $140.5
Income taxes 9.3 9.3 31.6 41.1
Distribution on capital securities of
subsidiary trusts, net of tax 4.6 4.6 13.6 13.8
------- ------- -------- -------
Income from continuing operations $ 18.8 $ 22.2 $ 62.6 $ 85.6
Discontinued operations:
After tax gain on disposal of Radian
International LLC, net of deferred loss - - - 30.3
------- ------- -------- -------
Net income $ 18.8 $ 22.2 $ 62.6 $115.9
------- ------- -------- -------
Earnings per common share-assuming dilution:
Income from continuing operations $ 0.64 $ 0.72 $ 2.10 $ 2.71 **
Net income $ 0.64 $ 0.72 $ 2.10 $ 3.57 ***
Dividends declared per common share $ 0.44 $ 0.42 $ 1.28 $ 1.22
Average common shares outstanding and
common stock equivalents 34.7 35.3 34.6 35.3
- --------------------------------------------- ------- ------- -------- -------
</TABLE>
* Computation excludes rounding
** Includes $0.71 from Gain on sale of IRI
*** Includes $0.71 from Gain on sale of IRI and $0.86 from Gain on sale of
Radian.
<PAGE>
Summary of Financial Position
In millions, except per share amounts
September 30, 1999 December 31, 1998
- --------------------------------------------------------------------------------
Assets
Cash and short-term investments $ 91.0 $ 80.6
Fixed maturities, at fair value 525.3 577.1
Equity securities, at fair value 409.8 437.1
------------------------------------
Cash and invested assets 1,026.1 1,094.8
Reinsurance assets 826.3 630.4
Insurance premiums receivable 133.6 146.7
Engineering services receivable 35.0 26.1
Fixed assets 56.6 54.9
Other assets 211.4 191.1
------------------------------------
Total assets $2,289.0 $2,144.0
------------------------------------
Liabilities
Unearned insurance premiums and ceding $ 440.9 $ 477.9
commissions
Claims and adjustment expenses 760.7 550.3
Total borrowings 69.5 46.1
Other liabilities 212.9 241.5
------------------------------------
Total liabilities 1,484.0 1,315.8
Company obligated mandatorily
redeemable capital securities
of subsidiary Trust I holding
solely junior subordinated
deferrable interest debentures
of the Company, net of
unamortized discount 109.0 108.9
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 396.0 419.3
-------------------------------
Total $2,289.0 $2,144.0
-------------------------------
Shareholders' equity per
common share 13.63 $ 14.53
Based on common shares outstanding of 29.1 28.9
Pro forma shareholders' equity
per common share assuming
conversion of Trust II capital
securities and net exercise of
in the money HSB stock options $ 20.15 $ 20.77
Based on pro forma common shares outstanding 34.5 34.6
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