Exhibit 99.1
CONTACT:
James C. Rowan Jr.
Office: (860) 722-5180
FOR IMMEDIATE RELEASE
HSB GROUP, INC. REPORTS GAINS IN FIRST QUARTER
HARTFORD, Conn., April 21, 1998 -- HSB Group, Inc. (NYSE-HSB), today reported
that first quarter net income per share on a fully diluted basis, before gains
from sales of the company's interests in Industrial Risk Insurers and Radian
International LLC, was 89 cents. This represents an increase of 14.1 percent,
compared to 78 cents per share in the first quarter of 1997. Including the gains
from the sales, net income per share on a fully diluted basis for the quarter
was $3.26.
HSB Group's gross earned insurance premiums grew 16.7 percent. The expense ratio
declined to 45.1 percent from 47.9 percent for the first quarter of 1997. The
combined ratio -- the sum of losses and expenses as a percentage of insurance
revenue -- was 89 percent compared to 90 percent last year.
"In our insurance business, the impact of the January ice storm-related losses
in Canada was partially offset by excellent results in our domestic business,"
said Gordon W. Kreh, President and Chief Executive Officer.
HSB's Engineering Services net revenues increased 19.9 percent over the first
quarter of 1997. The margin improved to 8.4 percent.
Income from investment operations was $18.4 million compared to $8.5 million in
the first quarter of 1997. The increase reflects good performance in the
portfolio and additional investable funds resulting from the Industrial Risk
Insurers and Radian sales and issuance during 1997 of Capital Securities, which
bear a carrying cost of approximately $7 million per quarter. Realized gains of
9 cents per share (as compared to 2 cents in 1997) were primarily the result of
calls on fixed income investments.
HSB Group, Inc. is a global provider of insurance products and engineering
management consulting services. HSB is the parent company of The Hartford Steam
Boiler Inspection and Insurance Company, founded in 1866 and the largest
provider of equipment breakdown insurance in the world.
Summary of Operations
In millions, except per share amounts
Quarter
Ended March 31 Percent
1998 1997** Change
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Gross earned premium.......................................... $ 181.7 $ 155.7 16.7%
Reinsurance................................................... 80.2 33.4
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Net earned premium......................................... $ 101.5 $ 122.3
Claims and adjustment expenses................................ 44.6 51.5
Policy acquisition expenses................................... 12.6 23.5
Underwriting and inspection expenses.......................... 33.5 35.3
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Insurance operating gain................................... $ 10.8 $ 12.0
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Loss ratio............................................... 43.9% 42.1%
Expense ratio*........................................... 45.1% 47.9%
Combined ratio*.......................................... 89.0% 90.0%
Engineering services revenues................................. $ 17.6 $ 14.7 19.9%
Engineering services expenses................................. 16.1 13.6
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Engineering services operating gain........................ $ 1.5 $ 1.1
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Engineering services operating margin.................... 8.4% 7.1%
Investment income, net of related interest expense............ $ 15.2 $ 8.0 90.0%
Realized investment gains..................................... 3.2 0.5
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Income from investment operations.......................... $ 18.4 $ 8.5
Interest expense.............................................. 0.1 0.2
Gain on sale of IRI........................................... 39.0 -
Income from continuing operations before income taxes and
distributions on capital securities $ 69.6 $ 21.4
Income taxes.................................................. 22.5 5.5
Distribution on capital securities of subsidiary trusts,
net of tax................ 4.5 -
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Income from continuing operations............................. $ 42.6 $ 15.9
Discontinued operations:
After tax gain on disposal of Radian International LLC, net of
deferred loss of $6.6 million 30.3 -
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Net income.................................................... $ 72.9 $ 15.9
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Earnings per share-assuming dilution:
Income from continuing operations.......................... $ 1.96*** $ 0.78 151.3%
Net income................................................. $ 3.26 $ 0.78 317.9%
Dividends declared per common share........................... $ 0.60 $ 0.57
Average common shares outstanding and common stock equivalents 23.4 20.5
* 1998 and 1997 exclude goodwill amortization related to EIG
** Restated for the effects of discontinued operations.
*** Includes $1.07 earnings per share - assuming dilution for gain
on sale of IRI.
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Summary of Financial Position
In millions, except per share amounts
Percent
March 31, 1998 December 31, 1997 Change
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Assets
Cash and short-term investments........................ $ 167.7 $ 424.5
Fixed maturities, at fair value........................ 538.5 248.4
Equity securities, at fair value....................... 441.1 323.8
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Cash and invested assets............................ 1,147.3 996.7
Insurance premiums receivable.......................... 192.7 138.0
Engineering services receivable........................ 14.4 12.2
Fixed assets........................................... 37.5 36.4
Investment in Radian................................... - 83.4
Reinsurance assets..................................... 307.1 124.5
Other assets........................................... 172.5 149.0
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Total assets........................................ $ 1,871.5 $ 1,540.2 21.5%
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Liabilities
Unearned premiums...................................... $ 467.6 $ 290.3
Claims and adjustment expenses......................... 296.7 276.7
Total borrowings....................................... 26.0 67.5
Other liabilities...................................... 261.0 151.5
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Total liabilities................................... 1,051.3 786.0
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 capital
securities of subsidiary Trust II holding solely
junior subordinated deferrable interest
debentures of the Company.............................. 300.0 300.0
Shareholders' equity...................................... 411.3 345.3
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Total.................................................. $ 1,871.5 $ 1,540.2
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Shareholders' equity per common share..................... $ 21.18 $ 17.63 20.1%
Based on common shares outstanding of..................... 19.4 19.6
Proforma shareholders' equity per common share
assuming conversion of Trust II capital securities
and net exercise of in the money HSB stock options....... $ 30.38 $ 27.69
Based on pro forma common shares outstanding.............. 23.4 23.3
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