-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fi+MJCtJzK5fHO7IXEKeWMMbR+Q0SKAJlHVqw1VCmeruogp31Ujxn0BK+Frj4lGf r6rvLZZDbKMKa+b/Y7/f1A== /in/edgar/work/0001034588-00-000025/0001034588-00-000025.txt : 20001025 0001034588-00-000025.hdr.sgml : 20001025 ACCESSION NUMBER: 0001034588-00-000025 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001024 ITEM INFORMATION: FILED AS OF DATE: 20001024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HSB GROUP INC CENTRAL INDEX KEY: 0001034588 STANDARD INDUSTRIAL CLASSIFICATION: [6331 ] IRS NUMBER: 061475343 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-13135 FILM NUMBER: 744835 BUSINESS ADDRESS: STREET 1: ONE STATE ST STREET 2: P O BOX 5024 CITY: HARTFORD STATE: CT ZIP: 06102-5024 BUSINESS PHONE: 8607221866 MAIL ADDRESS: STREET 1: ONE STATE ST STREET 2: PO BOX 5024 CITY: HARTFORD STATE: CT ZIP: 06102 8-K 1 0001.txt 8-K FILING 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 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) Item 5. Other Events On October 24, 2000, 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 24, 2000 announcing third quarter results. 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: October 24, 2000 /s/ R. Kevin Price R. Kevin Price Senior Vice President and Corporate Secretary EX-99 2 0002.txt PRESS RELEASE Exhibit 99 CONTACT: James C. Rowan, Jr. Office: (860) 722-5180 FOR IMMEDIATE RELEASE HSB GROUP, INC. REPORTS THIRD QUARTER RESULTS HARTFORD, Conn., OCTOBER 24, 2000 - HSB Group, Inc. (NYSE: HSB) today reported a net loss for the third quarter of $18.0 million or $.62 per share, compared to net income of $18.8 million or $.64 per share, for the third quarter of 1999. Results for the third quarter include an extraordinary charge of $.34 per share associated with the early extinguishment of debt. The results also include a charge of $20.7 million pretax or $.58 per share with respect to the special risk insurance business generated by the company's London-based affiliate, Engineering Insurance Limited. This charge includes provisions for future claims and certain other expenses as well as a non-tax-deductible write-down with respect to the goodwill impairment of that business. Chairman, President and Chief Executive Officer Richard H. Booth said: "While our domestic commercial equipment breakdown insurance business continues to perform very well, the Global Special Risk business has been adversely affected by a challenging environment. The actions we are taking position our special risk business appropriately while we work to achieve improved pricing, terms and conditions." Also contributing $.53 per share to the loss for the quarter was adverse loss experience in the company's Global Special Risk segment. The claims associated with this experience occurred after July 1, 2000, and totaled $23.2 million after reinsurance recoveries of $24.5 million. The majority of the gross loss experience related to international risks. The insurance combined ratio for the quarter was 121.5 percent excluding the $20.7 million pretax charge. Net Engineering Services revenues for the quarter increased 26.5 percent over the third quarter of 1999. The Engineering Services margin was 6.5 percent compared to 3.6 percent in 1999. On September 29, 2000, HSB Group, Inc sold its 51 percent interest in Integrated Process Technologies (IPT) to Enron Energy Services Operations, Inc. In a related transaction, HSB completed the sale of a call option the company held on an additional 29 percent interest in IPT to the other 49 percent holder in IPT. HSB recognized a pretax gain of $9.8 million or $.22 per share from these transactions. Income from investment operations was $31.3 million compared to $30.0 million in the third quarter of 1999. Realized gains for the quarter were $.35 per share in 2000 and $.30 per share in 1999. On August 18, 2000, American International Group, Inc. (NYSE: AIG) and HSB Group, Inc. (NYSE: HSB) announced that they had entered into a definitive agreement whereby AIG would acquire 100 percent of the outstanding stock of HSB Group, Inc. The proposed transaction with AIG is progressing as expected. A special meeting of HSB Group, Inc. shareholders to consider and vote on the proposed transaction will be held on Monday, November 6, 2000. At the request of AIG, a public hearing on the matter has been scheduled by the Insurance Commissioner of the State of Connecticut for November 8, 2000. On September 7, 2000, HSB Group, Inc. announced an agreement with Employers Reinsurance Corporation (a subsidiary of General Electric Capital Securities Services, Inc.) to redeem $300 million in convertible capital securities for a price of $315 million plus accrued interest. This action resulted in an extraordinary loss of $.34 per share. On September 14, 2000, AIG loaned $315 million to HSB the proceeds of which were used to redeem the convertible capital securities. The five-year term loan to HSB was made in connection with the previously announced definitive agreement for AIG to acquire 100 percent of the outstanding stock of HSB. HSB Group, Inc., 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 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. Summary of Operations In millions, except per share amounts
Quarter Percent Year-To-Date Percent Ended September 30, Change Ended September 30, Change 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Gross earned premiums $157.2 $200.6 -21.6% $515.7 $616.3 -16.3% Ceded premiums 51.4 107.9 219.2 333.4 ----------------------------------------------------------- Insurance premiums $105.8 $ 92.7 $296.5 $282.9 Claims and adjustment expenses 74.0 44.5 150.9 120.7 Policy acquisition expenses 23.3 21.6 64.8 65.5 Underwriting and inspection expenses 31.3 24.4 88.7 72.6 ----------------------------------------------------------- Insurance operating gain (loss) $(22.8) $ 2.2 $ (7.9) $ 24.1 ----------------------------------------------------------- Loss ratio* 70.0% 48.1% 50.9% 42.7% Expense ratio* 51.5% 49.6% 51.7% 48.8% Combined ratio* 121.5% 97.7% 102.6% 91.5% Engineering services revenues $ 38.7 $ 30.6 26.5% $115.9 $ 86.0 34.8% Engineering services expenses 36.2 29.5 107.8 80.3 ----------------------------------------------------------- Engineering services operating gain $ 2.5 $ 1.1 $ 8.1 $ 5.7 ----------------------------------------------------------- Engineering services operating margin* 6.5% 3.6% 7.0% 6.6% Investment income, net of related interest expense $ 16.0 $ 16.5 -3.0% $ 46.5 $ 48.8 -4.7% Realized investment gains 15.3 13.5 38.8 30.8 ----------------------------------------------------------- Income from investment operations $ 31.3 $ 30.0 $ 85.3 $ 79.6 ----------------------------------------------------------- Interest expense 1.5 0.6 2.6 1.6 Provision for international large risk business charges 20.7 - 20.7 - Gain on sale of interests in Integrated Process Technologies, LLC 9.8 - 9.8 - ----------------------------------------------------------- Income (loss) before income taxes and distributions on capital securities of subsidiary trusts $ (1.4) $ 32.7 $ 72.0 $107.8 Income taxes 2.6 9.3 27.1 31.6 Distribution on capital securities of subsidiary trusts, net of tax 4.1 4.6 13.5 13.6 ----------------------------------------------------------- Income (loss) before extraordinary item $ (8.1) $ 18.8 $ 31.4 $ 62.6 Loss on extinguishment of capital securities of subsidiary Trust II, net of tax 9.9 - 9.9 - ----------------------------------------------------------- Net income (loss) $(18.0) $ 18.8 $ 21.5 $ 62.6 =========================================================== Earnings (loss) per common share-assuming dilution: Income (loss) before extraordinary item $ (0.28)** $ 0.64 $ 1.08 $ 2.10 Net income (loss) $ (0.62)** $ 0.64 $ 0.74 $ 2.10 Dividends declared per common share $ 0.44 $ 0.44 $ 1.32 $ 1.28 Average common shares outstanding and common stock equivalents 28.8 34.7 29.1 34.6 - ---------------------------------------------------------------------------------------------------------------------------- *Computation excludes rounding **Net loss per share computed using average common shares outstanding
Summary of Financial Position In millions, except per share amounts September 30, 2000 December 31, 1999 - -------------------------------------------------------------------------------------------------------- Assets Cash and short-term investments $ 118.8 $ 126.5 Fixed maturities, at fair value 486.3 489.8 Equity securities, at fair value 384.1 381.8 ------------------------------------------ Cash and invested assets 989.2 998.1 Reinsurance assets 625.4 850.3 Insurance premiums receivable 78.5 104.4 Engineering services receivable 39.5 39.1 Fixed assets 53.5 58.2 Other assets 220.7 213.1 ========================================== Total assets $ 2,006.8 $ 2,263.2 ========================================== Liabilities Unearned insurance premiums and ceding commissions $ 259.1 $ 420.1 Claims and adjustment expenses 735.3 782.3 Total borrowings 342.6 66.6 Other liabilities 201.3 208.7 ------------------------------------------ Total liabilities 1,538.3 1,477.7 Company obligated mandatorily redeemable capital securities of subsidiary Trust I holding solely junior subordinated deferrable interest debentures of the Company, net of unamortized discount 105.0 109.0 Company obligated mandatorily redeemable convertible capital securities of subsidiary Trust II holding solely junior subordinated deferrable interest debentures of the Company - 300.0 Shareholders' equity 363.5 376.5 ========================================== Total $ 2,006.8 $ 2,263.2 ========================================== Shareholders' equity per common share* $ 12.56 $ 12.95 Based on common shares outstanding of 28.9 29.1 - -------------------------------------------------------------------------------------------------------- *Computation excludes rounding
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