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 20, 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 April 20, 1999, HSB Group, Inc. (the "Company") issued press releases
reporting its first quarter earnings, its declaration of a 42 cent per share
dividend, and the details of its Annual Meeting of shareholders. Included
herewith as Exhibits 99(i), 99(ii), and 99(iii) are the Company's press releases
related to these announcements and such information is incorporated herein by
reference.
Item 7. Exhibits.
99(i) Press release dated April 20, 1999 announcing first quarter results.
99(ii) Press release dated April 20, 1999 announcing the declaration of a
dividend.
99(iii) Press release dated April 20, 1999 reporting on the Company's annual
meeting.
<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: April 21, 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 FIRST QUARTER
HARTFORD, Conn., April 20, 1999 -- HSB Group, Inc. (NYSE-HSB) today reported
first quarter income per share from continuing operations of $.71 cents, a 20
percent increase over first quarter 1998 which, on a comparable basis, was $.59.
(Including the one-time gain from the sales of the company's interests in
Industrial Risk Insurers (IRI) and Radian International LLC, net income per
share for the first quarter of 1998 was $2.17.)
HSB Group's gross earned insurance premiums grew 16.3 percent. The combined
ratio -- the sum of losses and expenses as a percentage of insurance revenue --
was 87.7 percent compared to 89.2 percent last year.
Net engineering services revenues increased 40.4 percent over the first quarter
of 1998. The margin was 8.4 percent.
Income from investment operations was $22.8 million compared to $18.4 million in
the first quarter of 1998. Realized gains were $.14 per share.
<PAGE>
Shareholders' equity declined modestly since December 31, 1998 primarily as a
result of the repurchase of shares.
"We enter 1999 well positioned to continue building increased value for
shareholders," said Gordon W. Kreh, chairman, 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.
<PAGE>
Summary of Operations
In millions, except per share amounts
<TABLE>
<CAPTION>
Quarter
Ended March 31 Percent
1999 1998 Change
- ----------------------------------------------------- ------------- -------------- ------------
<S> <C> <C> <C>
Gross earned premium $ 208.9 $ 179.7 16.3%
Ceded premiums 112.4 80.3
------------- -------------- ------------
Insurance premium 96.5 99.4
Claims and adjustment expenses 38.3 44.6
Policy acquisition expenses 22.6 14.6
Underwriting and inspection expenses 24.0 29.7
------------- --------------
Insurance operating gain $ 11.6 $ 10.5
------------- --------------
Loss ratio 39.7% 44.9%
Expense ratio 48.0% 44.3%
Combined ratio 87.7% 89.2%
Engineering services revenues $ 27.6 $ 19.7 40.4%
Engineering services expenses 25.2 17.9
------------- -------------- ------------
Engineering services operating gain $ 2.4 $ 1.8
------------- -------------- ------------
Engineering services operating margin 8.4% 8.9%
Investment income, net of related interest expense $ 15.7 $ 15.2 3.6%
Realized investment gains 7.1 3.2
------------- -------------- ------------
Income from investment operations $ 22.8 $ 18.4
Interest expense 0.4 0.1
Gain on sale of IRI - 39.0
Income from continuing operations before income
taxes and distributions on capital securities $ 36.4 $ 69.6
Income taxes 10.9 22.5
Distribution on capital securities of subsidiary
trusts, net of tax 4.5 4.5
------------- --------------
Income from continuing operations $ 21.0 $ 42.6
Discontinued operations:
After tax gain on disposal of Radian International
LLC, net of deferred loss - 30.3
------------- --------------
Net income $ 21.0 $ 72.9
------------- --------------
Earnings per share-assuming dilution:
Income from continuing operations $ 0.71 $ 1.31*
Net income $ 0.71 $ 2.17**
Dividends declared per common share $ 0.42 $ 0.40
Average common shares outstanding and common stock
equivalents 34.5 35.2
</TABLE>
*Includes $0.72 from Gain on sale of IRI.
**Includes $0.72 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
<TABLE>
<CAPTION>
March 31, 1999 December 31, Percent
1998 Change
--------------------------------------------
<S> <C> <C> <C>
Assets
Cash and short-term investments $ 94.2 $ 80.6
Fixed maturities, at fair value 559.1 577.1
Equity securities, at fair value 426.8 437.1
----------------- --------------- ----------
Cash and invested assets 1,080.1 1,094.8
Reinsurance assets 637.3 630.4
Insurance premiums receivable 109.7 146.7
Engineering services receivable 32.6 26.1
Fixed assets 54.7 54.9
Other assets 198.6 191.1
----------------- --------------- ----------
Total asset $ 2,113.0 $ 2,144.0 -1.4%
----------------- --------------- ----------
Liabilities
Unearned insurance premiums and ceding commissions $ 454.6 $ 477.9
Claims and adjustment expenses 558.0 550.3
Total borrowings 51.3 46.1
Other liabilities 226.0 241.5
----------------- --------------- ----------
Total liabilities 1,289.9 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 414.2 419.3
----------------- --------------- ----------
Total $ 2,113.0 $ 2,144.0
----------------- --------------- ----------
Shareholders' equity per common share $ 14.28 $ 14.53 -1.7%
Based on common shares outstanding of 29.0 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 $ 20.65 $ 20.77
Based on pro forma common shares outstanding 34.6 34.6
</TABLE>
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Exhibit 99(ii)
CONTACT:
James C. Rowan Jr.
Office: (860) 722-5180
FOR IMMEDIATE RELEASE
HSB GROUP, INC. DECLARES DIVIDEND
HARTFORD, Conn., April 20, 1999 -- The Board of Directors of HSB Group, Inc.
(NYSE-HSB) today declared a regular quarterly dividend of 42 cents per share.
The dividend will be payable on July 29, 1999, to shareholders of record at the
close of business on July 9, 1999. This marks the 129th consecutive year in
which Hartford Steam Boiler has paid a dividend, one of the longest records of
the New York Stock Exchange.
# # #
Exhibit 99(iii)
MEDIA CONTACT:
James C. Rowan
Office: (860) 722-5180
FOR IMMEDIATE RELEASE
HSB GROUP, INC. HOLDS ANNUAL MEETING
HARTFORD, Conn., April 20, 1999 -- HSB Group, Inc. (NYSE: HSB) announced strong
results for 1998 and a positive outlook for continued growth in 1999 at its
annual meeting held today at the company's headquarters.
Chairman, President and Chief Executive Officer Gordon W. Kreh called 1998 a
good year for HSB. "During the year, we realized continued profitable growth in
our insurance businesses, excellent expansion and increased operating gains in
our engineering segment, and significant investment return and appreciation of
our portfolios. Net income per share was $4.21, compared to $2.20 in 1997 -- a
91 percent increase. Income from continuing operations, excluding the sale of
Industrial Risk Insurers, was $2.67, compared to $2.20 in 1997, a 21 percent
increase. These results confirm that our growth strategy is working."
Gross earned premium grew to $770.5 million, an increase of 26 percent over
1997. This was attributable in large measure to growth in the company's global
reinsurance business and formation of new alliances with other insurance
companies.
Kreh stated that the company's combined ratio -- the sum of losses and expenses
expressed as a percentage of insurance revenue -- was 89 percent, compared to
the industry average of 105 percent.
<PAGE>
Income from investment operations grew to $64 million, an increase of 74
percent over 1997. The increase reflected good performance in the portfolio,
additional invested funds resulting from the IRI and Radian sales, and HSB's
issuance of $300 million of capital securities on December 31, 1997.
During the meeting, shareholders elected four directors for three-year terms,
approved the amended 1995 Stock Option Plan, and appointed independent public
accountants.
Elected to three-year terms on the board of directors were: Joel B. Alvord,
president and managing director of Shawmut Capital Management; Richard G.
Dooley, consultant to Massachusetts Mutual Life Insurance Company; Gordon W.
Kreh, chairman, president and chief executive officer of HSB Group, Inc.; and
Lois D. Rice, guest scholar, Program in Economic Studies at the Brookings
Institution.
At the meeting, Kreh reviewed significant highlights of 1998: Conclusion of the
sale of its interest in Radian International LLC to the Dow Chemical Company,
and the sale of its 24-percent interest in Industrial Risk Insurers to Employers
Reinsurance Corporation, a subsidiary of G.E. Capital Services. In May, HSB
acquired Solomon Associates, the world's leader in defining industry performance
standards and best practices for the petroleum refining industry. Also in May,
HSB stock split three-for-two and the July and October regular quarterly
dividend was adjusted to 40 cents a share from 60 cents a share to reflect the
split. In July, HSB acquired Kemper Insurance Companies' monoline book of boiler
and machinery business and their American Society Mechanical Engineers (ASME)
code inspection business.
<PAGE>
HSB's greatest opportunity for growth is through HSB's relationships with other
property-casualty insurers HSB calls `client companies.' Through special
reinsurance agreements, HSB integrates equipment breakdown coverage into client
companies' policies. "Growing reliance on equipment and technology is increasing
the need for HSB's specialty insurance. This environment presents a tremendous
opportunity, and we are aggressively pursuing it globally." Kreh said.
Kreh projected continued domestic and international growth for HSB's Engineering
Services, particularly for its engineering management consulting services.
Increased demand for engineering management consulting is reflected in the
continued growth of HSB Reliability Technologies, a subsidiary that provides
companies with increased profitability through reliability programs.
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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