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) - July 26, 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 July 26, 1999, HSB Group, Inc. (the "Company") issued a press release
reporting its second quarter earnings and announcing the declaration of a
dividend of 44 cents per share. 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(i)Press release dated July 26, 1999 announcing second quarter results.
99(ii)Press release dated July 25, 1999 announcing the declaration of a
dividend.
<PAGE>
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: July 27, 1999 /s/ R. Kevin Price
R. Kevin Price
Senior Vice President
and Corporate Secretary
Exhibit 99(i)
CONTACT:
James C. Rowan Jr.
Office: (860) 722-5180
FOR IMMEDIATE RELEASE
HSB GROUP, INC. REPORTS GAINS IN SECOND QUARTER
HARTFORD, Conn., July 26, 1999 -- HSB Group, Inc. (NYSE-HSB), today reported
that second quarter net income per share on a fully diluted basis, was 76 cents.
This represents an increase of 11.8 percent, compared to 68 cents per share in
the second quarter of 1998.
HSB Group's gross earned insurance premiums grew 17.7 percent. The combined
ratio -- the sum of losses and expenses as a percentage of insurance revenue --
was 89.1 percent for the quarter, down from 89.3 percent in the second quarter
of 1998. The year-to-date combined ratio is 88.5 percent compared to 89.3
percent last year.
HSB's Engineering Services net revenues increased 22.5 percent over the second
quarter of 1998. The margin was 8.2 percent.
"I am pleased with the continued double-digit growth in our insurance and
engineering services businesses in a competitive operating environment," said
Gordon W. Kreh, chairman, president and chief executive officer. "These results
confirm that we have a strong growth strategy in place."
Investment income, net of related interest expense, was $16.6 million compared
to $15.9 million in the second quarter of 1998. Realized gains, reflecting, in
significant measure, a rebalancing of the equity portfolio in consideration of
recent market movements, were $10.2 million compared to $7.3 million in the
second quarter of last year.
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HSB Group, Inc. is a global provider of specialty insurance products,
engineering services, and management consulting services. HSB Group 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. For more information about HSB, visit its website at www.hsb.com.
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<TABLE>
Summary of Operations
In millions, except per share amounts
<CAPTION>
Quarter Year-To-Date
Ended June 30 Percent June 30 Percent
1999 1998 Change 1999 1998 Change
-------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Gross earned premiums.......................... $ 206.8 $ 175.7 17.7% $ 415.7 $ 355.4 17.0%
Ceded premiums................................. 113.1 85.3 225.5 165.6
----- ---- ------- -----
Insurance premiums........................... 93.7 90.4 190.2 189.8
Claims and adjustment expenses................. 37.9 40.4 76.2 85.0
Policy acquisition expenses.................... 21.3 12.8 43.9 27.4
Underwriting and inspection expenses........... 24.2 27.5 48.2 57.2
-------- ------- ---- -------
Insurance operating gain..................... $ 10.3 $ 9.7 $ 21.9 $ 20.2
-------- ------- -------- -------
Loss ratio*................................ 40.5% 44.7% 40.1% 44.8%
Expense ratio*............................. 48.6% 44.6% 48.4% 44.5%
Combined ratio*............................ 89.1% 89.3% 88.5% 89.3%
Engineering services revenues.................. $ 27.8 $ 22.7 22.5% $ 55.4 $ 42.4 30.7%
Engineering services expenses.................. 25.6 20.7 50.8 38.6
---- ---- ---- ------
Engineering services operating gain.......... $ 2.2 $ 2.0 $ 4.6 $ 3.8
-------- ------- -------- -------
Engineering services operating margin*..... 8.2% 8.9% 8.3% 8.9%
Investment income, net of related
interest expense............................. $ 16.6 $ 15.9 4.4% $ 32.3 $ 31.1 3.9%
Realized investment gains...................... 10.2 7.3 17.3 10.5
---- --- ---- ------
Income from investment operations............ $ 26.8 $ 23.2 $ 49.6 $ 41.6
Interest expense............................... 0.6 0.1 1.0 0.2
Gain on sale of IRI............................ - - - 39.0
Income from continuing operations
before income taxes and distributions
on capital securities........................ $ 38.7 $ 34.8 $ 75.1 $ 104.4
Income taxes................................... 11.4 9.3 22.3 31.8
Distribution on capital securities
of subsidiary trusts, net of tax ............ 4.5 4.7 9.0 9.2
--- --- --- ---
Income from continuing operations.............. $ 22.8 $ 20.8 $ 43.8 $ 63.4
Discontinued operations:
After tax gain on disposal of Radian
International LLC, net of deferred loss. .... - - - 30.3
-------- ------- -------- -------
Net income..................................... $ 22.8 $ 20.8 $ 43.8 $ 93.7
======== ======= ======== =======
Earnings per common share-assuming dilution:
Income from continuing operations............ $ 0.76 $ 0.68 $ 1.47 $ 1.99 **
Net income................................... $ 0.76 $ 0.68 $ 1.47 $ 2.85 ***
Dividends declared per common share............ $ 0.42 $ 0.40 $ 0.84 $ 0.80
Average common shares outstanding and
common stock equivalents...................... 34.8 35.4 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
June 30, December 31,
1999 1998
--------- -----------
Assets
Cash and short-term investments................ $ 96.9 $ 80.6
Fixed maturities, at fair value................ 544.9 577.1
Equity securities, at fair value............... 441.6 437.1
----- -----
Cash and invested assets................... 1,083.4 1,094.8
Reinsurance assets............................. 660.8 630.4
Insurance premiums receivable.................. 121.7 146.7
Engineering services receivable................ 29.4 26.1
Fixed assets................................... 56.3 54.9
Other assets................................... 211.2 191.1
----- -----
Total assets............................... $2,162.8 $ 2,144.0
======== =========
Liabilities
Unearned insurance premiums and
ceding commissions........................... $ 426.8 $ 477.9
Claims and adjustment expenses................. 592.1 550.3
Total borrowings............................... 80.1 46.1
Other liabilities.............................. 232.1 241.5
----- -----
Total liabilities.......................... 1,331.1 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.... 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............................. 422.8 419.3
-------- ---------
Total.......................................... $2,162.8 $ 2,144.0
======== =========
Shareholders' equity per common share............ $ 14.52 $ 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. $ 20.68 $ 20.77
Based on pro forma common shares outstanding..... 35.0 34.6
-###-
Exhibit 99(ii)
CONTACT:
James C. Rowan Jr.
Office: (860) 722-5180
FOR IMMEDIATE RELEASE
HSB GROUP, INC. DECLARES DIVIDEND
HARTFORD, Conn., July 26, 1999 - The Board of Directors of HSB Group, Inc.
(NYSE-HSB) today voted to increase the regular quarterly dividend from 42 cents
to 44 cents per share. The increased dividend will be payable on October 28,
1999, to shareholders of record at the close of business on October 11, 1999.
This marks the 34th consecutive year that shareholders have received a higher
dividend payment and the 129th consecutive year in which Hartford Steam Boiler
has paid a dividend, one of the longest records of the New York Stock Exchange.
