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 24, 2000
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 January 24, 2000, HSB Group, Inc. (the "Company") issued a press release
reporting its fourth quarter and 1999 year-end results. Included herewith as
Exhibit 99 (i) is the Company's press release related to this announcement and
such information is incorporated herein by reference.
On January 24, 2000, HSB Group, Inc. (the "Company") issued a press release
reporting its declaration of a dividend of 44 cents per share, payable on April
27, 2000. Included herewith as Exhibit 99 (ii) 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 January 24, 2000.
99 (ii) Press release dated January 24, 2000.
<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: January 26, 2000 /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 FOURTH QUARTER
AND 1999 YEAR-END RESULTS
HARTFORD, Conn., January 24, 2000 -- HSB Group, Inc. (NYSE-HSB) today reported
that fourth quarter net income per share on a fully diluted basis was $.35 cents
compared to $.63 cents in 1998. For the year, net income per share was $2.50
compared to $2.67 for the prior year, excluding gains on the sales of Radian and
Industrial Risk Insurers (IRI).
In the fourth quarter, the company's insurance earnings were adversely affected
by increased claims and adjustment expenses. In addition, earnings from
participation in IRI were negatively impacted by a reduction in insurance
premiums. HSB also incurred additional costs associated with testing of critical
information systems to ensure year 2000 compliance as well as costs associated
with the relocation of certain foreign insurance operations.
Net Engineering Services revenues for the fourth quarter increased 30 percent
over the fourth quarter of 1998. However, results were adversely affected by a
continued investment of operating funds to support accelerated growth of the
company's Engineering Services businesses as well as expenditures associated
with consolidation of certain domestic engineering operations.
<PAGE>
Income from Investment Operations was $25.1 million for the fourth quarter
compared to $24.6 million in 1998. Net investment income was $15.3 million
compared to $17.6 million in the fourth quarter of 1998.
The reduction in shareholders' equity since December 31, 1998 was caused by the
impact of rising interest rate levels on the company's fixed income investments.
"While results for the third and fourth quarters were disappointing, HSB remains
one of the most consistently profitable companies in the property/casualty
insurance industry," said Richard H. Booth, president and chief executive
officer. "The Company has sound reserves, is well capitalized and has the
financial strength to maintain its dividend policy as well as take advantage of
new business opportunities as they arise. We are focused on improving the trend
of operating earnings over the course of 2000," said Booth.
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.
This news release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, that are management's
estimates, assumptions and projections and are not guarantees of future
performance. Forward-looking statements involve known and unknown risks and
uncertainties. These and other important factors, including those mentioned in
various Securities and Exchange Commission filings made periodically by the
company, may cause the company's actual results and performance to differ
materially. Investors and prospective investors should read this news release in
conjunction with the company's most recent Form 10-K, Form 10-Q and other
documents filed with the Securities and Exchange Commission.
<PAGE>
Summary of Operations
In millions, except per share amounts
<TABLE>
<CAPTION>
Quarter Year-To-Date
Ended December 31 December 31
Percent Percent
1999 1998 Change 1999 1998 Change
------------ ----------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Gross earned premiums $207.5 $202.6 2.4% $ 823.8 $770.5 6.9%
Ceded premiums 108.5 95.8 441.9 374.4
------------ ----------- ---------- ----------- ------------ -----------
Insurance premiums $ 99.0 $106.8 $ 381.9 $396.1
Claims and adjustment expenses 45.1 45.8 165.8 174.9
Policy acquisition expenses 23.7 21.0 89.2 66.3
Underwriting and inspection expenses 33.0 30.2 105.6 113.7
------------ ----------- ---------- ----------- ------------ -----------
Insurance operating gain $ (2.8) $ 9.8 $ 21.3 $ 41.2
------------ ----------- ---------- ----------- ------------ -----------
Loss ratio* 45.5% 42.9% 43.4% 44.2%
Expense ratio* 57.3% 47.9% 51.0% 45.4%
Combined ratio* 102.8% 90.7% 94.4% 89.6%
Engineering services revenues $ 33.6 $ 25.8 30.2% $ 119.6 $ 93.5 27.9%
Engineering services expenses 36.3 24.1 116.6 86.2
------------ ----------- ---------- ----------- ------------ -----------
Engineering services operating gain
(loss) $ (2.7) $ 1.7 $ 3.0 $ 7.3
------------ ----------- ---------- ----------- ------------ -----------
Engineering services operating margin* -8.2% 6.4% 2.5% 7.8%
Investment income, net of related interest
expense $ 15.3 $ 17.6 -13.1% $ 64.1 $ 64.2 -0.2%
Realized investment gains 9.8 7.0 40.6 25.4
------------ ----------- ---------- ----------- ------------ -----------
Income from investment operations $ 25.1 $ 24.6 $ 104.7 $ 89.6
Interest expense 0.7 0.3 2.3 0.8
Gain (loss) on sale of IRI - (2.4) - 36.6
Income from continuing operations before
income taxes and distributions on capital
securities $ 18.9 $ 33.4 $ 126.7 $173.9
Income taxes 4.1 10.3 35.7 51.4
Distribution on capital securities of
subsidiary trusts, net of tax 4.6 4.6 18.2 18.4
------------ ----------- ---------- ----------- ------------ -----------
Income from continuing operations $ 10.2 $ 18.5 $ 72.8 $104.1
Discontinued operations:
After tax gain on disposal of Radian
International LLC, net of deferred loss
of $6.6 million - - - 30.3
------------ ----------- ---------- ----------- ------------ -----------
Net income $ 10.2 $ 18.5 $ 72.8 $134.4
------------ ----------- ---------- ----------- ------------ -----------
Earnings per common share-assuming dilution:
Income from continuing operations $ 0.35 $ 0.63 $ 2.50 $ 3.35 ***
Net income $ 0.35 $ 0.63 $ 2.50 $ 4.21 ****
Dividends declared per common share $ 0.44 $ 0.42 $ 1.72 $ 1.64
Average common shares outstanding and common
stock equivalents 29.3** 34.8 34.6 35.2
- ---------------------------------------------- ------------ ----------- ---------- ----------- ------------ -----------
</TABLE>
* Computation excludes rounding.
** The assumed conversion of the Company's convertible capital securities is
not used in the computation of earnings per share since such inclusion
would be anti-dilutitive.
*** Computes to $2.67 after excluding $0.68 from Gain on sale of IRI.
**** Computes to $2.67 after excluding $0.68 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>
December 31, December 31,
1999 1998
- ------------------------------------------------------------------------- ----------------- ------------------
<S> <C> <C>
Assets
Cash and short-term investments $ 126.5 $ 80.6
Fixed maturities, at fair value 489.8 577.1
Equity securities, at fair value 381.8 437.1
----------------- ------------------
Cash and invested assets 998.1 1,094.8
Reinsurance assets 850.3 625.0
Insurance premiums receivable 104.4 146.7
Engineering services receivable 39.1 26.1
Fixed assets 58.2 54.9
Other assets 213.1 191.1
----------------- ------------------
Total assets $2,263.2 $2,138.6
----------------- ------------------
Liabilities
Unearned insurance premiums and ceding commissions $ 420.1 $ 464.6
Claims and adjustment expenses 782.3 558.2
Total borrowings 66.6 46.1
Other liabilities 208.7 241.5
----------------- ------------------
Total liabilities 1,477.7 1,310.4
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 376.5 419.3
----------------- ------------------
Total $2,263.2 $2,138.6
----------------- ------------------
Shareholders' equity per common share* $ 12.95 $ 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* $ 19.61 $ 20.77
Based on pro forma common shares outstanding 34.5 34.6
</TABLE>
* Computation excludes rounding.
Exhibit 99 (ii)
CONTACT:
James C. Rowan Jr.
Office: (860) 722-5180
FOR IMMEDIATE RELEASE
HSB GROUP, INC. DECLARES DIVIDEND
HARTFORD, Conn., January 24, 2000 -- The Board of Directors of HSB Group, Inc.
(NYSE-HSB) today declared the regular quarterly dividend of 44 cents per share.
The dividend will be payable on April 27, 2000 to shareholders of record at the
close of business on April 10, 2000. This marks the 130th consecutive year in
which Hartford Steam Boiler has paid a dividend, one of the longest records of
the New York Stock Exchange.
