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) - January 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)
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Item 5. Other Events
On January 25, 1999, HSB Group, Inc. (the "Company") issued a press release
reporting its fourth 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 January 25, 1999 announcing fourth 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: January 25, 1999 /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 FOURTH QUARTER
HARTFORD, Conn., January 25, 1999 -- HSB Group, Inc. (NYSE-HSB) today reported
that the fourth quarter income per share on a diluted basis from continuing
operations, exclusive of post-closing adjustments related to the Industrial Risk
Insurers (IRI) sale, was 67 cents, compared to 64 cents in the fourth quarter of
1997.
HSB Group's gross earned insurance premiums grew 33 percent for the quarter and
26 percent for the year. The combined ratio -- the sum of losses and expenses as
a percentage of insurance revenue -- was 90.5 percent down from 93.0 percent in
the fourth quarter of last year. The year-to-date combined ratio was 89.4
percent, down from 91.7 percent last year. The year-to-date expense ratio was
45.2 percent, down from 47.3 percent in 1997.
Net engineering services revenues increased 61 percent over the fourth quarter
of 1997, reflecting revenue from new businesses and acquisitions as well as
organic growth. The operating gain for the fourth quarter increased 21 percent.
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Income from investment operations was $24.6 million compared to $18.9 million in
the fourth quarter of 1997. Net investment income was $17.6 million compared to
$11 million in the fourth quarter of 1997. Realized gains were $25.4 million for
the year.
"We enter 1999 with significant financial strength and 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.
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Summary of Operations
In millions, except per share amounts
<TABLE>
<CAPTION>
Quarter Year-To-Date
Ended December 31 Percent December 31 Percent
1998 1997 Change 1998 1997 Change
---- ---- ------- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Gross earned premium.................................... $ 202.6 $ 152.7 32.6% $ 770.5 $ 609.3 26.4%
Reinsurance............................................. 95.8 22.3 374.4 118.1
---- ---- ----- -----
Net earned premium................................... 106.8 130.4 396.1 491.2
Claims and adjustment expenses.......................... 45.8 60.9 174.9 217.9
Policy acquisition expenses............................. 21.0 23.3 66.3 90.7
Underwriting and inspection expenses.................... 30.2 37.3 113.7 142.8
---- ---- ----- -----
Insurance operating gain............................. $ 9.8 $ 8.9 $ 41.2 $ 39.8
------- ------- ------- -------
Loss ratio......................................... 42.9% 46.8% 44.2% 44.4%
Expense ratio*..................................... 47.6% 46.2% 45.2% 47.3%
Combined ratio*.................................... 90.5% 93.0% 89.4% 91.7%
Engineering services revenues........................... $ 25.8 $ 16.0 61.1% $ 93.5 $ 61.3 52.6%
Engineering services expenses........................... 24.1 14.6 86.2 57.0
---- ---- ---- ----
Engineering services operating gain.................. $ 1.7 $ 1.4 $ 7.3 $ 4.3
------- ------- ------- -------
Engineering services operating margin.............. 7.7% 8.7% 7.8% 7.1%
Investment income, net of related interest expense...... $ 17.6 $ 11.0 60.2% $ 64.2 $ 36.8 73.9%
Realized investment gains............................... 7.0 7.9 25.4 14.1
--- --- ---- ----
Income from investment operations.................... $ 24.6 $ 18.9 $ 89.6 $ 50.9
Interest expense........................................ 0.3 0.4 0.8 1.3
Gain (loss) on sale of IRI.............................. (2.4) _ 36.6 _
Income from continuing operations before income taxes
and distributions on capital securities.............. $ 33.4 $ 28.8 $ 173.9 $ 93.7
Income taxes............................................ 10.3 8.6 51.4 25.1
Distribution on capital securities of subsidiary trusts,
net of tax........................................... 4.6 1.3 18.4 2.3
--- --- ---- ---
Income from continuing operations....................... $ 18.5 $ 18.9 $ 104.1 $ 66.3
Discontinued operations:
After tax gain on disposal of Radian International LLC,
net of deferred loss of $6.6 million.................. - - 30.3 -
------- ------- ---- -------
Net income.............................................. $ 18.5 $ 18.9 $ 134.4 $ 66.3
======= ======= ======= =======
Earnings per share-assuming dilution:
Income from continuing operations.................... $ 0.63 $ 0.64 (1.6%) $ 3.35 $ 2.20 52.3%
Net income........................................... $ 0.63 $ 0.64 (1.6%) $ 4.21 $ 2.20 91.4%
Dividends declared per common share..................... $ 0.42 $ 0.40 $ 1.64 $ 1.56
Average common shares outstanding and common stock
equivalents.......................................... 34.8 29.6 35.2 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
December 31, 1998 December 31, 1997 Change
----------------- ----------------- -------
<S> <C> <C> <C>
Assets
Cash and short-term investments........................ $ 80.6 $ 424.5
Fixed maturities, at fair value........................ 577.1 248.4
Equity securities, at fair value....................... 437.1 323.8
----- -----
Cash and invested assets............................ 1,094.8 996.7
Reinsurance assets..................................... 630.4 124.5
Insurance premiums receivable.......................... 146.7 138.0
Engineering services receivable........................ 26.1 12.2
Fixed assets........................................... 54.9 36.4
Investment in Radian................................... - 83.4
Other assets........................................... 191.1 146.0
----- -----
Total assets........................................ $ 2,144.0 $ 1,537.2 39.5%
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Liabilities
Unearned insurance premiums and ceding commissions..... $ 477.9 $ 287.3
Claims and adjustment expenses......................... 550.3 276.7
Total borrowings....................................... 46.1 67.5
Other liabilities...................................... 241.5 151.5
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Total liabilities................................... 1,315.8 783.0
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...................................... 419.3 345.3
----- -----
Total.................................................. $ 2,144.0 $ 1,537.2
========= =========
Shareholders' equity per common share..................... $ 14.53 $ 11.75 23.7%
Based on common shares outstanding of..................... 28.9 29.4
Proforma shareholders' equity per common share assuming
conversion of Trust II capital securities
and net exercise of in the money HSB stock options..... $ 20.77 $ 18.46
Based on pro forma common shares outstanding.............. 34.6 35.0
</TABLE>
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