-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, f0SLpXRiWGa5QMgBnz2Q0B+B2cnw5KG9FN3xwelPPpiMn30vLn4kTIGRLM+B7Fln 3F/TKajifw3+ojDybN1hqA== 0000310823-95-000009.txt : 19950615 0000310823-95-000009.hdr.sgml : 19950615 ACCESSION NUMBER: 0000310823-95-000009 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941230 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950315 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARTFORD STEAM BOILER INSPECTION & INSURANCE CO CENTRAL INDEX KEY: 0000310823 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 060384680 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-10527 FILM NUMBER: 95520920 BUSINESS ADDRESS: STREET 1: ONE STATE ST CITY: HARTFORD STATE: CT ZIP: 06102 BUSINESS PHONE: 2037221866 MAIL ADDRESS: STREET 1: ONE STATE STREET STREET 2: P.O. BOX 5024 CITY: HARTFORD STATE: CT ZIP: 06102-5024 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) - December 30, 1994 THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY (Exact name of registrant as specified in its charter) Connecticut 0-13300 06-0384680 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) One State Street, Hartford, Connecticut 06102 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code - (203-722-1866) Item 2. Acquisition or Disposition of Assets On December 30, 1994 The Hartford Steam Boiler Inspection and Insurance Company (HSB) completed the acquisition of General Reinsurance Corporation's 50% interest in Engineering Insurance Group (EIG), a partnership of HSB and General Reinsurance formed in 1988 to provide machinery breakdown insurance to business and industry outside the United States and Canada. According to the terms of the transaction, HSB and General Reinsurance contributed their partnership interests to a newly formed corporation, EIG Co., in exchange for which HSB received all of the outstanding common shares of EIG Co. and General Reinsurance received preferred stock of EIG Co. with a stated value of $20 million and a dividend rate of 6.5% per annum. Subject to certain conditions, after a minimum period of two years the preferred stock can be exchanged for 6.5% preferred stock of HSB which is convertible, at General Reinsurance's option, into 398,370 common shares of HSB. Following the acquisition, Engineering Insurance Company, Limited, the insurance operating subsidiary of EIG Co. will remain a fully capitalized insurer based in London. The transaction has been accounted for as a purchase by HSB. The terms of the acquisition are more fully described in the Transaction Agreement filed as Exhibit 2 to the registrant's Current Report on Form 8-K dated January 17, 1995 and incorporated herein by this reference. Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired The following consolidated financial statements of Engineering Insurance Group are filed herewith: Consolidated Statement of Operations for the year ended December 31, 1993 Consolidated Statement of Financial Position as of December 31, 1993 Consolidated Statement of Cash Flows for the year ended December 31, 1993 Notes to Consolidated Financial Statements Report of Independent Accountants (b) Pro Forma Financial Information The following pro forma consolidated condensed financial statements of The Hartford Steam Boiler Inspection and Insurance Company are filed herewith: Pro Forma Condensed Consolidated Statement of Financial Position as of September 30, 1994 (Unaudited) Pro Forma Condensed Consolidated Income Statement for the Nine Months ended September 30, 1994 (Unaudited) Pro Forma Condensed Consolidated Income Statement for the Year Ended December 31, 1993 (Unaudited) Notes to Unaudited Pro Forma Condensed Consolidated Statement of Financial Position Notes to Unaudited Pro Forma Condensed Consolidated Income Statements (c) Exhibits 2. Transaction Agreement between The Hartford Steam Boiler Inspection and Insurance Company and General Reinsurance Corporation dated December 30, 1994 (filed as Exhibit 2 to the registrant's Current Report on Form 8-K dated January 17, 1995 and incorporated herein by this reference). 23.1 Consent of Price Waterhouse 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. THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY Dated: March 15, 1995 /s/ Robert C. Walker Robert C. Walker Senior Vice President and General Counsel INDEX TO EXHIBITS Exhibit No. 2 Transaction Agreement between The Hartford Steam Boiler Inspection and Insurance Company and General Reinsurance Corporation dated December 30, 1994 (filed as Exhibit 2 to the registrant's Current Report on Form 8-K dated January 17, 1995 and incorporated herein by this reference). 23.1 Consent of Price Waterhouse ENGINEERING INSURANCE GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1993 CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1993 (in thousands) 1993 Revenues: Insurance premiums $23,940 Net investment income 8,031 Realised Investment Gains 191 ------- Total revenues 32,162 Expenses: Claims and adjustment 14,459 Policy acquisition 5,032 Underwriting and inspection 10,086 Interest 6,799 ------- Total expenses 36,376 Loss before taxes 4,214 Income taxes: Current 1,424 Deferred 309 ------- Total income taxes 1,733 ------- Net loss $5,947 =======
[FN] See Notes to Consolidated Financial Statements. ENGINEERING INSURANCE GROUP FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT DECEMBER 31, 1993 (in thousands) 1993 Assets: Cash $ 1,114 Short term investments, at cost 10,646 Fixed maturities, at amortized cost 87,087 -------- Total cash and invested assets 98,847 Insurance premiums receivable and funds withheld 5,666 Fixed assets 1,341 Prepaid acquisition costs 2,160 Goodwill 8,250 Reinsurance recoverable 4,607 Other assets 3,881 -------- Total assets $124,752 ======== Liabilities: Unearned insurance premiums $13,258 Claims and adjustment expenses 19,961 Long term borrowings 67,000 Other liabilities 8,415 -------- Total liabilities 108,634 Partnership Capital: Partnership contributions 44,000 Partnership earnings (27,882) Total partnership capital 16,118 -------- Total liabilities and partnership capital $124,752 ========
See Notes to Consolidated Financial Statements. ENGINEERING INSURANCE GROUP FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1993 (in thousands) 1993 Operating Activities: Net loss $(5,947) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 893 Deferred income taxes 309 Realised investments gains, net of tax (191) Change in: Insurance premiums receivable (1,362) Prepaid acquisition costs (1,023) Reinsurance recoverable 1,178 Unearned insurance premiums 6,622 Claims and adjustment expenses 6,898 Other 2,354 -------- Cash provided by operating activities $9,731 ======== Investing Activities: Fixed asset additions $(1,147) Investments: Purchase of short-term investments, net (6,262) Purchase of fixed maturities (61,593) Proceeds from sale of fixed maturities 19,192 Redemption of fixed maturities 53,950 -------- Cash provided by investment activities $4,140 ======== Financing Activities: Repayment of long term debt $13,000 ======== Cash used in financing activities $13,000 ======== Net increase in cash 871 Cash at beginning of period 243 -------- Cash at end of period $1,114 ======== Interest paid $7,009 ======== Income tax paid $539 ========
See Notes to Consolidated Financial Statements. ENGINEERING INSURANCE GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1993 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Accounting Policies Consolidation The accompanying financial statements present the consolidated partnership accounts of Engineering Insurance Group (EIG) and its subsidiary (collectively, the Partnership) and are prepared in accordance with generally accepted accounting principles (GAAP). The Partnership holds 100% of the share capital of Engineering Insurance Company Limited (EICL). Significant intercompany transactions and balances have been eliminated on consolidation. Insurance Insurance premiums are recognised in the Partnership accounts when written and are net of reinsurance ceded, refunds and rebates. Provision for unearned premiums is made on a time apportionment basis for those periods of risk extending beyond the Partnership's financial year and are included in other assets on the Consolidated Statement of Financial Position. Underwriting acquisition expenses are deferred on a time apportionment basis for expenses which relate to policies which have periods of risk extending beyond the end of the financial year. The provision for outstanding claims consists of the estimated costs of claims to be paid in respect of incidents notified up to the balance sheet date supplemented by additional amounts to cover claims incurred but not reported at that date where considered necessary. The provision is stated net of salvage reinsurance and other recoveries but includes estimates for claims handling. Reinsurance recoverable represents amounts due from reinsurers for paid and unpaid claims and adjustment expense estimates through participation in insurance ceded arrangements. Investments Short term investments have a maturity of one year or less and are carried at cost which approximates fair value. Fixed maturities consists of bonds. Investment income is net of investment expenses and realised gains and losses. Income Taxes No income taxes are provided on Partnership activity. The consolidated insurance subsidiary reflects a provision for income taxes. Deferred income taxes are provided for items of income and expense which result in temporary differences in the treatment of such items for tax and financial statement purposes. Fixed Assets Fixed assets are carried at cost less accumulated depreciation. Depreciation is calculated to write-off the costs of fixed assets on a straight line basis over their estimated useful lives. Goodwill and Other Intangible Assets Goodwill is amortised over 20 years and other intangibles over 5 years. Foreign Currency Translation Gains and losses arising from the translation of the local currency value of foreign transactions to US dollars, the functional currency of the Partnership, are included in underwriting and inspection expenses. A net $363 thousand gain was taken into income in 1993. 2. Changes in Accounting Principles In 1993, the Partnership adopted Statement of Financial Accounting Standards No. 113 (SFAS 113), "Accounting and Reporting for Reinsurance of Short Duration and Long Duration Contracts". All amounts on the Consolidated Statements of Financial Position were reclassified accordingly. The adoption of SFAS 113 had no impact on net income. Accounting Standards Not Yet Adopted In May 1993, The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 115 (SFAS 115) "Accounting for Certain Investments in Debt and Equity Securities". SFAS 115, which is effective for the Partnership's fiscal year 1994 financial statements addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. 3. Investments (in thousands) 1993 Income from Investment Operations Net Investment Income: Short term interest $ 399 Fixed maturities 7,798 Investment expenses (166) -------- $8,031 ======== Realised Investment gains (losses): Fixed maturities: Gains 191 Losses 0 -------- Realized investment gains, 191 ======== Income from investment operations $8,222 ========
3. Investments (continued) Fixed Maturities: The amortized cost, estimated fair values (based principally upon quoted market prices) and gross unrealized gains and losses of fixed maturities at December 31 were as follows (in thousands): 1993 Estimated Gross Gross Amortised Fair Unrealized Unrealized Category Cost Value Gains Losses Foreign governments $19,101 $19,460 $ 359 $ 0 Corporates and other 67,986 70,095 2,109 0 -------- -------- -------- ------- Total fixed maturities $87,087 $89,555 $2,468 $0 ======== ======== ======== =======
The amortised cost and estimated fair value of fixed maturities at December 31, 1993 by contractual years to maturity follow (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations. 1993 --------------------- Amortised Estimated Maturity Cost Value One year or less $55,455 $56,201 Over one year through five years 28,209 29,529 Over five years through ten years 3,423 3,825 -------- -------- Total fixed maturities $87,087 $89,555 ======== ========
4. Fixed Assets Fixed assets are summarized as follows (in thousands): 1993 Land and buildings $ 0 Furniture, equipment and other 2,114 -------- 2,114 Less accumulated depreciation (773) -------- Fixed assets $1,341 ======== 5. Reinsurance The components of net written and net earned insurance premiums were as follows (in thousands): 1993 Written premiums Direct $ 6,178 Assumed 32,072 Ceded (6,420) -------- Net written insurance premiums $31,830 ======== Earned premiums Direct $ 6,101 Assumed 23,833 Ceded (5,994) -------- Net earned insurance premiums $23,940 ======== 5. Reinsurance (continued) The Partnership participates in reinsurance ceded agreements to control its exposure to losses. In the unlikely event that ceded reinsurers are unable to meet their obligations, the Partnership would continue to have primary liability to policyholders for losses incurred. As a result of the adoption of SFAS 113, reinsurance recoverable on unpaid claims and the unearned portion of ceded reinsurance premiums are reported as assets, rather than netted against the related liability accounts. The adoption of SFAS 113 did not have any impact on net income for 1993. The Partnership is not party to any contracts which do not comply with the risk transfer provisions of SFAS 113. At 31 December 1993 reinsurance recoverable on paid losses was $1,597 thousand and reinsurance recoverable on unpaid losses was $4,559 thousand. 6. Income Taxes Tax provision The tax provision is comprised of the following: 1993 ----------- % of Pretax Amount income (in thousands) % Loss before taxes $(4,214) 100 ------- ------- Tax at statutory rates (1,475) 35 Tax effect of Partnership Income (loss)* 3,313 (79) Foreign tax rate differential (105) 3 ------- ------- Total Income Taxes $1,733 (41) ======= =======
*Partnership income (loss) is taxable directly to the individual partners. No income tax provision (benefit) is made at the partnership level. 6. Income Taxes (continued) Deferred Income Taxes Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Partnership's deferred tax liabilities and assets as of 31 December 1993 are as follows (in thousands): 1993 Deferred tax liabilities: Depreciation $(320) Accrued interest income (215) -------- Total deferred tax liabilities (535) Deferred tax assets 0 -------- Total deferred tax assets 0 -------- Net deferred tax liability $(535) ======== 7. Leases Minimum rental commitments under noncancellable leases accounted for as operating leases with initial or remaining terms of more than one year were as follows (in thousands): Years ended December 31 1994 $ 305 1995 305 1996 305 1997 183 1998 183 1999 and thereafter 917 -------- Total $2,198 Costs under operating leases are charged as an expense as incurred. 8. Debt Long term Maturities on long term borrowings for the years succeeding 31 December 1993 are as follows (in thousands): 1994 $43,000 1995 24,000 -------- Total $67,000 The long term borrowings are in the form of loan notes held with Chase Manhattan Bank. Interest is charged at the rate of 9.35% per annum. The borrowings are guaranteed by means of a floating charge on the undertaking, property and assets of the Partnership. 9. Pension Plans The Partnership participates in a multi-employer pension plan, through its participating partners' defined benefits pension plans, covering employees of EIG and EICL. The plan assets are recorded and accounted for by the partners accordingly. The Partnership recorded $346 thousand in pension expense for the year ended 1993. 10. Partnership Capital (in thousands) 1993 Partnership contributions: General Reinsurance Corporation Inc $22,000 Hartford Steam Boiler Inspection and Insurance Company 22,000 -------- $44,000 ======== Partnership earnings: Accumulated partnership earnings as of 1 January $(21,935) Net income (loss) for the year (5,947) -------- Accumulated partnership earnings (27,882) ======== Total Partnership Capital $16,118 ======== 11. Related Party Transactions The Hartford Steam Boiler Inspection and Insurance Company ("HSB") and General Reinsurance Corporation Inc. (GenRe) were both related parties to EIG due to the nature of the Partnership. The following transactions took place during the year: Engineering expenses amounting to $ 1,943 thousand were charged by HSB. Reinsurance was ceded to GenRe and HSB, amounting to $ 1,623 thousand and $ 327 thousand, respectively. At the end of the year, balances amounting to $ 484 thousand were due to HSB and GenRe. 12. Subsequent Events In December 1994, HSB acquired the remaining 50% interest in the Partnership from Gen Re. Coincident with the December 1994 acquisition, the Partnership was incorporated with HSB acquiring all outstanding common shares and Gen Re acquiring preferred shares in the new company, EIG Co. The Group made a pre tax gain of $2.7 million and a post tax loss of $ 71 thousand and held net assets of $ 32 million for the year ending December 31, 1994. REPORT OF INDEPENDENT ACCOUNTANTS To the board of directors and partners of Engineering Insurance Group In our opinion, the accompanying consolidated statement of financial position and the related consolidated statements of operations and cash flows present fairly, in all material respects, the financial position of Engineering Insurance Group and its subsidiary at 31 December 1993, and the results of their operations and cash flows for the year then ended in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements based upon our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. PRICE WATERHOUSE London 10 March 1995 The Hartford Steam Boiler Inspection and Insurance Company Pro Forma Condensed Consolidated Financial Statements (Unaudited) The following unaudited pro forma condensed consolidated statements of income for HSB for the nine months ended September 30, 1994 and year ended December 31, 1993, present consolidated operating results for HSB as if HSB's acquisition of 50% of EIG not previously owned by HSB had occurred as of January 1, 1993. The accompanying unaudited pro forma condensed consolidated Statement of Financial Position as of September 30, 1994 gives effect to the 50% acquisition as if it had occurred as of September 30, 1994. The unaudited pro forma condensed financial data does not purport to represent what HSB's financial position or results of operations actually would have been had the transaction in fact occurred on the dates indicated, or to project HSB's financial position or results of operations for any future period. The pro forma adjustments are based upon available information and certain assumptions believed to be reasonable in the circumstances. The unaudited pro forma consolidated financial information should be read in conjunction with the accompanying notes thereto and the separate historical financial statements of HSB as of and for the nine months ended September 30, 1994, and for the year ended December 31, 1993, which are contained in HSB's Form 10-Q for the quarterly period ended September 30, 1994 and in its Annual Report on Form 10-K for the year ended December 31, 1993, respectively. The pro forma adjustments are provided for informational purposes only and are applied to the historical consolidated financial statements of HSB and EIG to account for the acquisition as a purchase. Under purchase accounting the total purchase price will be allocated to EIG Co. assets and liabilities based upon relative fair values. Hartford Steam Boiler Inspection and Insurance Company Pro Forma Condensed Consolidated Statement of Financial Position (Unaudited) September 30, 1994 (in millions) HSB EIG Pro Forma Pro Forma Historical Historical 100% Adjustments HSB ---------- --------------- ----------- --------- ASSETS: CASH $ 6.70 $ 1.20 $ 7.90 SHORT-TERM INVESTMENTS 66.80 16.30 83.10 FIXED MATURITIES 161.60 39.10 200.70 EQUITY SECURITIES 213.00 213.00 --------- --------- --------- TOTAL CASH & INVESTED ASSETS 448.10 56.60 504.70 INSURANCE PREMIUMS RECEIVABLE 62.80 15.20 78.00 ENGINEERING SERVICES RECEIVABLE 72.30 72.30 FIXED ASSETS 60.90 1.80 62.70 PARTICIPATION IN POOLS & ASSOCIATIONS 8.60 $ (8.10)(B) 0.50 PREPAID ACQUISITION COSTS 30.60 4.10 34.70 CAPITAL LEASE 17.70 17.70 REINSURANCE RECOVERABLE 37.40 13.70 51.10 OTHER ASSETS 74.00 9.70 11.90 (A) 95.60 --------- --------- -------- --------- TOTAL ASSETS $ 812.40 $ 101.10 $ 3.80 $ 917.30 ========= ========= ======== ========= LIABILITIES: UNEARNED INSURANCE PREMIUMS $ 165.60 $ 27.80 $ 193.40 CLAIMS AND ADJUSTMENT EXPENSES 187.10 27.70 214.80 SHORT-TERM BORROWINGS 31.10 24.00 $ 0.20 (A) 55.30 LONG-TERM BORROWINGS 0.60 0.60 CAPITOL LEASE 27.80 27.80 DEFERRED INCOME TAXES (3.00) (1.30) (0.10)(A) (4.40) DIVIDEND PAYABLE 11.30 11.30 EMPLOYEE STOCK OWNERSHIP PLAN 2.20 2.20 OTHER LIABILITIES 85.90 6.60 20.00 (A) 112.50 --------- --------- -------- --------- TOTAL LIABILITIES 508.60 84.80 20.10 613.50 --------- --------- -------- --------- PARTNERSHIP INTEREST/COMMON EQUITY 16.30 (16.30)(A)(B) 0.00 PREFERRED STOCK 20.00 (A) (20.00)(A) 0.00 COMMON STOCK 10.00 10.00 ADDITIONAL PAID-IN CAPITOL 34.00 34.00 UNREALIZED INVESTMENT GAINS, NET OF TAX 20.60 20.60 RETAINED EARNINGS 285.90 285.90 TREASURY STOCK, @ COST (40.20) (40.20) BENEFIT PLANS (6.50) (6.50) --------- --------- -------- --------- TOTAL SHAREHOLDER'S EQUITY 303.80 16.30 (16.30) 303.80 --------- --------- -------- --------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 812.40 $ 101.10 $ 3.80 $ 917.30 ========= ========= ======== =========
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Statement of Financial Position. The Hartford Steam Boiler Inspection and Insurance Company Notes to Unaudited Pro Forma Condensed Consolidated Statement of Financial Position (A) Pro forma adjustments reflecting the issuance of EIG Co. preferred stock and the resulting minority interest position reflected on HSB's consolidated statement of financial position. Pro forma adjustments resulting from the allocation of purchase price based on relative fair values of underlying net assets acquired are as follows: - Excess purchase price over fair value of net assets acquired. - Premium allocated to short term debt based on current interest rates. - Adjustment to deferred tax asset based upon other purchase adjustments. (B) Adjustments to eliminate HSB's 100% interest in EIG partnership, including the 50% interest previously reported on the equity basis of accounting. Hartford Steam Boiler Inspection and Insurance Company Pro Forma Condensed Consolidated Income Statement (Unaudited) For the Nine Months Ended September 30, 1994 (in millions except per share amounts) HSB EIG Pro Forma Pro Forma Historical Historical Adjustments HSB Consolidated ---------- ---------- ----------- ---------------- REVENUES: INSURANCE PREMIUMS $ 255.40 $ 22.90 $ 278.30 NET ENGINEERING SERVICES 172.00 172.00 NET INVESTMENT INCOME 19.10 3.70 22.80 REALIZED INVESTMENT GAINS 8.20 (0.10) 8.10 --------- --------- --------- TOTAL REVENUES 454.70 26.50 481.20 EXPENSES: CLAIMS AND ADJUSTMENT 111.00 9.40 120.40 POLICY ACQUISITION 48.00 4.90 52.90 UNDERWRITING & INSPECTION 80.10 4.80 84.90 NET ENGINEERING SERVICES 158.80 2.80 161.60 OTHER 1.20 2.40 $ (0.2) (a) 5.20 0.8 (b) 1.0 (c) PROPOSITION 103 2.90 2.90 --------- --------- -------- --------- TOTAL EXPENSES 402.00 24.30 1.6 427.90 EQUITY IN OPERATIONS OF INS. ASSOC. 1.10 (1.1) (d) 0.00 INCOME BEFORE TAXES AND CUMULATIVE --------- --------- -------- --------- EFFECT OF CHANGE IN ACCTG. PRIN. 53.80 2.20 (2.7) 53.30 --------- --------- -------- --------- INCOME TAXES: CURRENT 12.70 1.10 (1.0) (e) 12.20 (0.6) (f) DEFERRED 2.60 0.80 3.40 --------- --------- -------- --------- TOTAL INCOME TAXES 15.30 1.90 (1.6) 15.60 INCOME BEFORE CUMULATIVE EFFECT --------- --------- -------- --------- OF CHANGE IN ACCTG. PRIN. $ 38.50 $ 0.30 $ (1.1) $ 37.70 ========= ========= ======== ========= PER SHARE: INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCTG. PRIN. $ 1.88 $ 1.84 ========= ========= AVERAGE SHARES OUTSTANDING 20.50 20.50
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Income Statement. Hartford Steam Boiler Inspection and Insurance Company Pro Forma Condensed Consolidated Income Statement (Unaudited) For the Year Ended December 31, 1993 (in millions except per share amounts) HSB EIG Pro Forma Pro Forma Historical Historical Adjustments HSB Consolidated ---------- ---------- ----------- ---------------- REVENUES: INSURANCE PREMIUMS $ 349.20 $ 23.90 $ 373.10 NET ENGINEERING SERVICES 231.50 231.50 NET INVESTMENT INCOME 29.30 8.40 37.70 REALIZED INVESTMENT GAINS 26.10 26.10 --------- -------- --------- TOTAL REVENUES 636.10 32.30 668.40 EXPENSES: CLAIMS AND ADJUSTMENT 199.10 14.40 213.50 POLICY ACQUISITION 64.20 5.00 69.20 UNDERWRITING & INSPECTION 112.30 5.40 117.70 NET ENGINEERING SERVICES 219.70 3.30 223.00 OTHER 1.80 8.40 $ (0.4) (a) 12.10 1.0 (b) 1.3 (c) RESTRUCTURING 20.00 20.00 --------- --------- -------- --------- TOTAL EXPENSES 617.10 36.50 1.9 655.50 EQUITY IN OPERATIONS OF INS. ASSOC. (2.10) 2.1 (d) 0.00 INCOME BEFORE TAXES AND CUMULATIVE --------- --------- -------- --------- EFFECT OF CHANGE IN ACCTG. PRIN. 16.90 (4.20) 0.2 12.90 --------- --------- -------- --------- INCOME TAXES: CURRENT 6.90 1.40 (0.9) (e) 5.90 (1.5) (f) DEFERRED (3.10) 0.30 (2.80) --------- --------- -------- --------- TOTAL INCOME TAXES 3.80 1.70 (2.4) 3.10 INCOME BEFORE CUMULATIVE EFFECT --------- --------- -------- --------- OF CHANGE IN ACCTG. PRIN. $ 13.10 $ (5.90) $ 2.6 $ 9.80 ========= ========= ======== ========= PER SHARE: INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCTG. PRIN. $ 0.63 $ 0.47 ========== ========= AVERAGE SHARES OUTSTANDING 20.7 20.7
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Income Statement. The Hartford Steam Boiler Inspection and Insurance Company Notes to Unaudited Pro Forma Condensed Consolidated Income Statements (a) Adjustment to reflect elimination of amortization of goodwill and other intangibles on EIG's financials resulting from the original investment. (b) Adjustment to reflect amortization of goodwill arising from the current transaction over a 15 year period. (c) Adjustment to reflect preferred stock dividend paid to minority interest resulting from the transaction. (d) Adjustment to eliminate HSB's original 50% interest in the historical earnings of EIG, reported on the equity basis of accounting. (e) Adjustment to eliminate HSB's existing 50% share of taxes arising from EIG's consolidated incorporated subsidiary, Engineering Insurance Company, Limited. (f) Adjustment to reflect HSB's tax provision on the EIG partnership activity for the 50% portion not previously owned. EX-23 2 10 March 1995 The Directors Hartford Steam Boiler Inspection and Insurance Company One State Street Hartford, Connecticut 06102-5024 USA Dear Sirs, We hereby consent to the inclusion of the financial statements of Engineering Insurance Group for the year ended 31 December 1993 audited by ourselves, in the Form 8-K Current Report of The Hartford Steam Boiler Inspection and Insurance Company dated 17 January 1995. Yours faithfully, PRICE WATERHOUSE London -----END PRIVACY-ENHANCED MESSAGE-----