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
CAPITAL 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 CAPITAL 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.
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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.
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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.
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