SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

/x/     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1999

                                       OR

/ /      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to

Commission File Number 001-13135

                                 HSB GROUP, INC.
             (Exact name of registrant as specified in its charter)

                  CONNECTICUT                            06-1475343
          (State or other jurisdiction of              (I.R.S. Employer
          incorporation or organization)            Identification No.)

        P.O. BOX 5024, ONE STATE STREET,
             HARTFORD, CONNECTICUT                       06102-5024
     (Address of principal executive offices)           (Zip Code)

                                 (860) 722-1866
              (Registrant's telephone number, including area code)

                                 Not applicable
              (Former name, former address and former fiscal year,
                        if changed since the last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No

The number of shares  outstanding of the  registrant's  common stock without par
value, as of March 31, 1999:  29,000,782


<PAGE>


                                 HSB GROUP, INC.

                                      INDEX


PART I   FINANCIAL STATEMENTS                                             PAGE

     Item 1 - Financial Statements

     Consolidated Statements of Operations for the Quarters 
     ended March 31, 1999 and 1998 (unaudited).............................. 3

     Consolidated Statements of Comprehensive Income for the 
     Quarters ended March 31, 1999 and 1998 (unaudited)..................... 4

     Consolidated  Statements  of  Financial  Position  
     as  of  March  31,  1999 (unaudited) and December 31, 1998............. 5

     Consolidated  Statements of Cash Flows for the Three 
     Months ended March 31, 1999 and 1998 (unaudited) ...................... 6

     Notes to Consolidated Financial Statements (unaudited)................. 7

     Item 2 -  Management's  Discussion and Analysis of  
     Consolidated  Financial Condition and Results of Operations........... 12

PART II  OTHER INFORMATION

     Item 1 - Legal Proceedings............................................ 21 
      
     Item 6 - Exhibits and Reports on Form 8-K............................. 21 
     

SIGNATURES................................................................. 22


                                       2
<PAGE>
Item 1.  Financial Statements

                                 HSB GROUP, INC.
                      Consolidated Statements of Operations
                                    Unaudited
                      (in millions, except per share data)

                                                         Quarter
                                                      Ended March 31
                                                 1999              1998
                                            ----------------------------------
Revenues:
  Gross earned premium                         $ 208.9           $ 179.7
  Ceded premiums                                 112.4              80.3
                                            ----------------------------------
  Insurance premiums                              96.5              99.4
  Engineering services                            27.6              19.7
  Net investment income                           15.7              15.2
  Realized investment gains                        7.1               3.2
                                            ----------------------------------
     Total revenues                              146.9             137.5
                                            ----------------------------------

Expenses:
  Claims and adjustment                           38.3              44.6
  Policy acquisition                              22.6              14.6
  Underwriting and inspection                     24.0              29.7
  Engineering services                            25.2              17.9
  Interest                                         0.4               0.1
                                            ----------------------------------
     Total expenses                              110.5             106.9
                                            ----------------------------------

Gain on sale of IRI                                -                39.0

Income from continuing operations 
   before income taxes and distributions    
   on capital securities                       $  36.4           $  69.6

Income taxes (benefit):
   Current                                         8.2              27.6
   Deferred                                        2.7              (5.1)
                                            ----------------------------------
     Total income taxes                        $  10.9           $  22.5

Distribution on capital securities of 
   subsidiary trust, net of income          
   tax benefits of $2.4 and $2.5                   4.5               4.5
                                            ----------------------------------
Income from continuing operations              $  21.0           $  42.6

Discontinued operations:
     Loss from operations, net of income 
      tax benefits of $ - and $3.2                 -                (6.6)
                                               

     Gain on disposal, net of income 
      taxes of $ - and $23.7                       -                36.9
                                            ----------------------------------

Total discontinued operations                  $   -             $  30.3
                                            ----------------------------------

Net income                                     $  21.0           $  72.9
                                            ==================================

Per share data:

Net income per common share-basic:
    Income from continuing operations          $   0.72          $   1.45
    Discontinued operations                        -                 1.04
                                            ==================================
    Net income                                 $   0.72          $   2.49
                                            ==================================

Net income per common 
 share-assuming dilution:
    Income from continuing operations          $   0.71          $   1.31
    Discontinued operations                        -                 0.86
                                            ==================================
    Net income                                 $   0.71          $   2.17
                                            ==================================

Dividends declared per share                   $   0.42          $   0.40
Average shares outstanding and common 
 stock equivalents                                34.5              35.2

See Notes to Consolidated Financial Statements.

                                       3
<PAGE>




                                 HSB GROUP, INC.
                 Consolidated Statements of Comprehensive Income
                                    Unaudited
                                  (in millions)

                                                              Quarter
                                                           Ended March 31,
                                                         1999           1998
                                                  ------------------------------
Net income                                         $     21.0     $     72.9
Other comprehensive income, net of tax:
   Unrealized gains (losses) on securities:

     Unrealized holding gains (losses) 
      arising during the period, net of taxes    
       (benefits) of ($4.2) and $10.9                    (8.0)          18.2

     Add : reclassification adjustments for 
      gains included in net income                       (4.6)          (0.7)
                                                  ------------------------------

       Total unrealized gains on securities             (12.6)          17.5
     Foreign currency translation adjustments, 
      net of income taxes                                 0.3            0.1
                                                  ------------------------------

     Other comprehensive income                         (12.3)          17.6

                                                  ------------------------------
     Comprehensive income                          $      8.7     $     90.5
                                                  ==============================

See Notes to Consolidated Financial Statements

                                       4
<PAGE>




                                 HSB GROUP, INC.
                  Consolidated Statements of Financial Position
                      (In millions, except per share data)

                                                        March 31,   December 31,
                                                           1999         1998
                                                       (Unaudited)
                                                      --------------------------
Assets:
 Cash and cash equivalents                             $     3.7      $    18.3
 Short-term investments, at cost                            90.6           62.3
 Fixed maturities, at fair value 
  (cost -$562.7;  $568.5)                                  559.1          577.1
 Equity securities, at fair value 
  (cost - $322.8;  $326.3)                                 426.7          437.1
                                                      --------------------------
    Total cash and invested assets                       1,080.1        1,094.8

 Reinsurance assets                                        637.3          630.4
 Insurance premiums receivable                             109.7          146.7
 Engineering services receivable                            32.6           26.1
 Fixed assets                                               54.7           54.9
 Prepaid acquisition costs                                  50.5           46.6
 Capital lease                                              14.4           14.6
 Other assets                                              133.7          129.9
                                                      ==========================
    Total assets                                       $ 2,113.0      $ 2,144.0
                                                      ==========================

Liabilities:
  Unearned insurance premiums                          $   454.6      $   477.9
  Claims and adjustment expenses                           558.0          550.3
  Short-term borrowings                                     26.2           21.0
  Long-term borrowings                                      25.1           25.1
  Capital lease                                             27.8           27.9
  Deferred income taxes                                     38.6           42.7
  Dividends and distributions on capital
   securities                                               17.9           23.2
  Ceded reinsurance payable                                 56.9           64.1
  Other liabilities                                         84.8           83.6
                                                      --------------------------
    Total liabilities                                    1,289.9        1,315.8
                                                      --------------------------

Company obligated mandatorily redeemable 
 capital securities of subsidiary Trust I
 holding solely junior subordinated   
 deferrable interest debentures of the 
 Company, net of unamortized
 discount of $1.1 in 1999 and 1998                         108.9          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:

   Common stock (stated value; shares 
    authorized 50.0; shares issued and
     outstanding 29.0; 28.9)                                10.0           10.0 
                                                    
   Additional paid-in capital                               35.2           33.5
   Accumulated other comprehensive income                   54.5           66.8
   Retained earnings                                       321.4          311.2
   Benefit plans                                            (6.9)          (2.2)
                                                      --------------------------
      Total shareholders' equity                           414.2          419.3
                                                      --------------------------
      Total                                            $ 2,113.0      $ 2,144.0
                                                      ==========================

     Common shareholders' equity per common share      $    14.28     $    14.53

See Notes to Consolidated Financial Statements.

                                       5
<PAGE>





                                 HSB GROUP, INC.
                      Consolidated Statements of Cash Flows
                                    Unaudited
                                  (In Millions)

                                                                 Quarter
                                                             Ended March 31,
                                                          1999            1998
                                                  ------------------------------
Operating Activities:
Net income                                         $       21.0    $      72.9
Adjustments to reconcile net income to net 
 cash provided by operating activities:
   Depreciation and amortization                           5.1             2.9
   Deferred income taxes (benefit)                         2.7            (5.1)
   Realized investment gains                              (7.1)           (3.2)
   Distributions on capital securities                     6.9             7.0
   Gain from the disposition of Radian, 
    net of income taxes                                    -             (30.3)
   Gain from the disposition of IRI, 
    net of income taxes                                    -             (25.2)
   Change in balances, net of effects from 
    purchases and sales of subsidiaries:
     Insurance premiums receivable                        37.0           (54.7)
     Engineering services receivable                      (6.3)           (2.2)
     Prepaid acquisition costs                            (3.9)           26.7
     Reinsurance assets                                   (6.9)         (182.6)
     Unearned insurance premiums                         (23.3)          140.6
     Claims and adjustment expenses                        7.7            20.0
     Ceded reinsurance payable                            (7.2)           46.8
     Other                                                (3.3)            1.8
                                                  ------------------------------
       Cash provided by operating activities              22.4            15.4
                                                  ------------------------------

Investing Activities:
Fixed asset additions, net                                (3.3)           (3.3)

Investments:
   Sale (purchase) of short-term 
    investments, net                                     (28.3)           54.5
   Purchase of fixed maturities                          (13.6)         (307.1)
   Proceeds from sale of fixed maturities                 16.0            11.6
   Redemption of fixed maturities                          2.7             2.3
    Purchase of equity securities                        (56.6)         (132.0)
   Proceeds from disposition of Radian                      -            128.9
   Proceeds from disposition of IRI                         -             49.1
   Proceeds from sale of equity securities                68.1            47.3
                                                  ------------------------------
     Cash used in investment activities                  (15.0)         (148.7)
                                                  ------------------------------

Financing Activities:
Increase (decrease) in short-term 
 borrowings                                                4.4           (41.5)
Dividends and distributions on 
 capital securities                                      (24.4)          (14.4)
Reacquisition of stock                                    (2.2)          (19.7)
Exercise of stock options                                  0.2             6.6
                                                  ------------------------------
       Cash used in financing activities                 (22.0)          (69.0)
                                                  ------------------------------

Net decrease in cash and cash equivalents                (14.6)         (202.3)

Cash and cash equivalents at beginning of period          18.3           293.2
                                                  ------------------------------
Cash and cash equivalents at end of period         $       3.7     $      90.9
                                                  ==============================
Interest paid                                      $       1.3     $       0.1
                                                  ------------------------------
Federal income tax paid                            $       1.8     $       0.8
                                                  ------------------------------

See notes to Consolidated Financial Statements.

                                       6
<PAGE>




                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
1.       General

         The interim  consolidated  financial  statements in this report include
         adjustments   based  on  management's  best  estimates  and  judgments,
         including  estimates of future loss  payments,  which are  necessary to
         present  a fair  statement  of the  results  for  the  interim  periods
         reported.  These  adjustments are of a normal,  recurring  nature.  The
         financial  statements  are prepared on the basis of generally  accepted
         accounting  principles  and  should  be read in  conjunction  with  the
         financial  statements  and  related  notes in the 1998  Annual  Report.
         Certain  amounts for 1998 have been  reclassified  to conform  with the
         1999 presentation.

2.       Discontinued Operations

         On January 2, 1998, The Hartford Steam Boiler  Inspection and Insurance
         Company  (HSBIIC)  exercised  its option to put its 40 percent share in
         Radian  International  LLC  (Radian  LLC) to The Dow  Chemical  Company
         (Dow), for approximately $129 million, net of expenses.  Radian LLC was
         formed  in  January  1996  as a  joint  venture  with  Dow  to  provide
         environmental,  engineering,  information  technology,  remediation and
         strategic  chemical  management  services to industries and governments
         world-wide. In connection with the formation of the new company, HSBIIC
         contributed  substantially  all of the  assets and  liabilities  of its
         wholly-owned  subsidiary,  Radian  Corporation  at  historical  cost to
         Radian  LLC. No gain was  recognized  on the  transfer.  The results of
         Radian  LLC  were  classified  as  discontinued   operations  following
         ratification  on July  28,  1997 by HSB's  Board of  Directors  of
         management's  decision  to exercise  its put.  The  Company's  share of
         Radian  LLC's  losses   incurred   subsequent   to  such   decision  of
         approximately $6.6 million after-tax was deferred and recognized at the
         time the gain was recognized in 1998. This  transaction  resulted in an
         after-tax gain of $36.9 million which was recorded in the first quarter
         of 1998.

3.       Industrial Risk Insurers

         On January 6, 1998,  HSBIIC sold its 23.5 percent  share in  Industrial
         Risk Insurers (IRI) to Employers Reinsurance  Corporation (ERC), one of
         the  world's  largest  reinsurance  companies,  in  accordance  with  a
         previously  announced purchase and sale agreement between ERC and IRI's
         twenty-three  member  insurers.  The gain on the sale of IRI was  $36.6
         million  pre-tax and $23.8  million  after-tax,  of which $39.0 million
         pre-tax and $25.2 million after-tax was recognized in the first quarter
         of 1998. In the fourth  quarter of 1998,  adjustments  were made to the
         costs  associated  with the sale.  IRI is a  voluntary,  unincorporated
         joint underwriting  association,  which provides property insurance for
         the class of business known as "highly protected risks" (HPR) -- larger
         manufacturing,   processing,   and  industrial  businesses  which  have
         invested in protection  against loss through the use of sprinklers  and
         other means. HSBIIC received gross proceeds of $49.1 million,  prior to
         transaction  costs, for its 23.5 percent share in IRI. Because the sale
         was  structured  in part as a  reinsurance  transaction,  a portion  of
         HSBIIC's gross proceeds was utilized to reinsure in-force policies with
         ERC.

         Contemporaneous  with the close of the sale, IRI was reconstituted with
         ERC (with a 99.5 percent  share) and HSBIIC (with a 0.5 percent  share)
         as  the  sole  members.  The  new  association  was  renamed  HSB
         Industrial Risk Insurers. HSBIIC writes the business for HSB Industrial
         Risk Insurers using its insurance  licenses and provides  certain other
         management and technical services.  In addition,  through various quota
         share reinsurance agreements with ERC and HSB Industrial Risk Insurers,
         HSBIIC transferred its manufacturing book of business to HSB Industrial
         Risk  Insurers  and  retains  85  percent  of the  equipment  breakdown
         insurance  and 15 percent of the  property  insurance  of the  combined
         insurance portfolio. The agreements are of indefinite 

                                       7
<PAGE>

         duration,  but ERC has an option to  purchase  HSB's  interest  in the
         business in the event of a 50 percent or more change in the control of
         HSB.


4.       Recent Accounting Developments

         The Accounting  Standards Executive Committee of the American Institute
         of  Certified   Public   Accountants   (AcSEC)  recently  issued  three
         Statements  of Position  (SOP) which became  effective for fiscal years
         beginning  after December 15, 1998; SOP 97-3,  "Accounting by Insurance
         and Other  Enterprises for  Insurance-Related  Assessments",  SOP 98-1,
         "Accounting  for the Costs of Computer  Software  Developed or Obtained
         for Internal  Use",  and SOP 98-5,  "Reporting on the Costs of Start-Up
         Activities".   Because  the  Company's   accounting  policies  were  in
         compliance with the provisions of the SOP's, the  implementation of the
         SOP's had no impact upon the results of operations, financial condition
         or cash flows.

         In June 1998, the Financial  Accounting  Standards  Board (FASB) issued
         Statement of Financial  Accounting Standard (SFAS) No. 133, "Accounting
         for  Derivative  Instruments  and Hedging  Activities".  This statement
         establishes   accounting   and  reporting   standards  for   derivative
         instruments, including certain derivative instruments embedded in other
         contracts, and for hedging activities. It requires that all derivatives
         be  recognized  as either  assets or  liabilities  in the  statement of
         financial position and that such instruments be measured at fair value.
         In addition,  all hedging relationships must be designated,  reassessed
         and  documented  pursuant  to the  provisions  of SFAS  No.  133.  This
         statement is effective for fiscal years  beginning after June 15, 1999.
         The Company anticipates that the adoption of the provisions of SFAS No.
         133 will not have a material impact on results of operations, financial
         condition or cash flows.

         In October 1998, AcSEC issued SOP 98-7, "Deposit Accounting: Accounting
         for Insurance and Reinsurance  Contracts That Do Not Transfer Insurance
         Risk." The SOP  identifies  several  methods of deposit  accounting and
         provides  guidance  on the  application  of each  method.  This  SOP is
         effective for financial  statements  for fiscal years  beginning  after
         June 15,  1999.  Currently  the  Company is not party to any  contracts
         which do not comply with the risk transfer  provisions of SFAS No. 113,
         "Accounting  and  Reporting  for  Reinsurance  of  Short-Duration   and
         Long-Duration  Contracts,"  and,  therefore,  does not  anticipate  the
         adoption  of SOP  98-7  will  have a  material  impact  on  results  of
         operations, financial condition or cash flows.

5.       Legal Proceedings

         HSBIIC has been involved in three  significant  claim-related  disputes
         concerning  the extent to which certain  explosion  events were insured
         under boiler and machinery coverages of HSBIIC.  Information  regarding
         these  disputes has been  provided in previous  10-K and 10-Q  reports.
         Current  rulings  in all three  cases  confirm  HSBIIC's  long-standing
         position that HSBIIC  policies do not cover the  explosion  events that
         occurred in those cases.  In one case the parties settled their dispute
         following  Summary  Judgment  rulings of the Federal District Court for
         the State of Illinois;  in a second case, a decision of an  arbitration
         panel  has  been  confirmed  by the  Superior  Court  of the  State  of
         Connecticut;  and in a third case, the Federal Court of Appeals for the
         Seventh  Circuit  has  remanded  the matter for entry of a judgment  in
         HSBIIC's favor.

         The Company is also  involved in various  other  legal  proceedings  as
         defendant or co-defendant  that have arisen in the normal course of its
         business.  In the  judgment  of  management,  after  consultation  with
         counsel,  it is improbable  that any  liabilities  which may arise from
         such  litigation  will have material  adverse  impact on the results of
         operations or the financial position of the Company.

                                       8
<PAGE>


6.       Earnings per share

         On April 21, 1998 the Board of Directors approved a three-for-two stock
         split  for  shares  held of record on May 1,  1998.  Additional  shares
         resulting  from  the  split  were  distributed  on  May  22,  1998.  In
         accordance  with SFAS No. 128,  earnings  per share  presentations  for
         March 1998 have been adjusted to reflect the impact of the stock split.

                                       9
<PAGE>

         Computation of Earnings Per Share:
                                                       Quarter Ended
                                                       March 31, 1999
                                                       --------------
<TABLE>
<CAPTION>
                                                   Income          Shares            Per Share
                                                   ------          ------            ---------
<S>                                               <C>                <C>             <C>   
Net income                                        $ 21.0

Basic EPS:
Income available to common shareholders           $ 21.0 (A)
Weighted Average Common Shares Outstanding                           28.9 (B)
Net income per common share-basic:                                                   $0.72 (A/B)*
Effect of dilutive securities:
   After-tax interest on convertible capital     
     securities                                   $  3.4
   Convertible capital securities                                     5.3
   Stock options                                                      0.3
Diluted EPS:
Income available to common and assumed            
   conversions:                                   $ 24.4 (C)         34.5 (D)
Net income per common share-assuming dilution:                                       $0.71 (C/D)*
</TABLE>


                                                       Quarter Ended
                                                       March 31, 1998
                                                       --------------
<TABLE>
<CAPTION>
                                               Income             Shares            Per Share
                                               ------             ------            ---------
<S>                                           <C>                <C>                 <C>    
Net income                                    $ 72.9

Basic EPS:
Income available to common shareholders       $ 72.9 (A)

Weighted Average Common Shares                                   
   Outstanding                                                   29.3 (B)
Net income per common share-basic:                                                   $2.49 (A/B)*

Effect of dilutive securities:
   After-tax interest on convertible         
     capital securities                       $  3.4
   Convertible capital securities                                 5.3
   Stock options                                                  0.6
Diluted EPS:
Income available to common and assumed        
   conversions:                               $ 76.3 (C)         35.2 (D)

Net income per common share-assuming dilution:                                       $2.17 (C/D)* 
</TABLE>

         *  Computation excludes rounding.

                                       10
<PAGE>


7.       Segment Information

         In 1998,  HSB  implemented  the  provisions  of  Statement of Financial
         Accounting  Standards  (SFAS) 131,  "Disclosures  about  Segments of an
         Enterprise and Related  Information".  This standard requires companies
         to  report  financial  and  descriptive  information  about  reportable
         operating  segments  utilizing  the  management  approach  to  defining
         operating  segments.  It includes disclosure  requirements  relating to
         products  and  services,  geographic  areas  and major  customers.  The
         adoption of SFAS 131 did not affect consolidated  results of operations
         or  financial  position  but  did  affect  the  disclosure  of  segment
         information.

         HSB has four reportable  segments--Commercial insurance, Global Special
         Risk  insurance,   Engineering  services  and  Investments.  HSB  is  a
         multi-national company operating primarily in North American, European,
         and Asian  markets.  Through its  Commercial  segment  operations,  HSB
         provides risk modification services,  equipment breakdown insurance and
         loss recovery  services to commercial  businesses.  The Global  Special
         Risk  operating  segment  focuses  on the needs of  equipment-intensive
         industries by offering all risk coverage  with  customized  engineering
         consulting and risk management.  HSB's Engineering  services operations
         offers  professional  scientific and technical  consulting for industry
         and government on a worldwide  basis. The Company's  investment  assets
         are managed by its Investment operating segment.

         The accounting  policies of the segments are consistent  with generally
         accepted accounting principles except for certain benefit charges which
         comprise the Corporate  Account.  HSB evaluates the  performance of its
         segments and  allocates  resources to them based on net income  (loss).
         Segment assets are not included in this  evaluation  process.  Interest
         income  and  expense  are   included  in  the  results  of   Investment
         operations.

         The  following  presents  revenue  and net  income  from the  Company's
         reportable  segments and reconciles these amounts to the  corresponding
         consolidated totals:

           For the quarters ended March 31,              1999            1998
           ---------------------------------------- ----------------------------

           Revenues from continuing operations
           Insurance premiums:
           Commercial                                 $   80.3        $   68.1
           Global Special Risks                           15.7            30.0
           Engineering services                           27.6            19.7
           Net investment income and realized 
            investment gains                              22.8            18.4
                                                    ------------    ------------
           Total revenues from reportable 
            segments                                     146.4           136.2
           Other segments                                   .5             1.3
                                                    ------------    ------------
           Total revenues                             $  146.9        $  137.5
                                                    ============    ============


           Net income (loss):
           Commercial                                 $    1.4        $    1.3
           Global Special Risks                            5.2             4.2
           Engineering services                            1.3             1.0
           Investment                                     16.0            13.4
                                                    ------------    ------------
           Total net income from reportable 
            segments                                      23.9            19.9
           Other segments                                  0.0              .7
           Corporate account                               1.6             1.3
           Distributions on capital securities            (4.5)           (4.5)
           Discontinued operations                         0.0            30.3
           Gain on sale of IRI, net of 
            income taxes                                   0.0            25.2
                                                    ------------    ------------
                                                                    
           Net income                                 $   21.0        $   72.9
                                                    ============    ============

                                       11
<PAGE>




ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - MARCH 31, 1999

RESULTS OF OPERATIONS
---------------------
(dollar amounts in millions)

Consolidated Overview
---------------------
                                                           Quarter Ended
                                                             March 31
                                                             --------
                                                      1999              1998
                                                      ----              ----

Revenues:

Gross earned premiums                              $  208.9         $  179.7
Ceded premiums                                        112.4             80.3
                                                 ---------------- --------------

Insurance premiums                                     96.5             99.4

Engineering services                                   27.6             19.7

Net investment income                                  15.7             15.2

Realized investment gains                               7.1              3.2
                                                 ---------------- --------------

   Total revenues                                    $146.9          $ 137.5
                                                 ================ ==============

Pre-tax Income from Continuing Operations:

   Pre-tax income excluding sale of IRI               $36.4            $30.6
   Pre-tax gain on sale of IRI                          0.0             39.0
                                                 ---------------- --------------

   Pre-tax income                                      36.4             69.6

Income taxes on continuing operations                  10.9             22.5

Distributions on capital securities                     4.5              4.5
                                                 ---------------- --------------

Income from continuing operations                      21.0             42.6

Discontinued operations                                 0.0             30.3
                                                 ---------------- --------------

Net income                                            $21.0            $72.9
                                                 ================ ==============

Net income per common share:

   Basic                                               $0.72            $2.49
   Assuming dilution                                   $0.71            $2.17


                                       12
<PAGE>

Absent the sales of Industrial Risk Insurers (IRI) and Radian  International LLC
(Radian LLC) discussed  below, the Company's 1999 after-tax  earnings  increased
20.7  percent  from the  first  quarter  of 1998 due to higher  realized  gains,
improved  underwriting  results and higher engineering gains. Net income for the
first quarter of 1998 included  after-tax gains on the sale of HSB's interest in
IRI of $25.2 million and Radian LLC of $30.3 million. The Radian LLC gain is net
of after-tax  operating  losses of $6.6 million that were  deferred in 1997 when
the decision was made to exercise HSB's option to put the Company's  interest to
The Dow Chemical  Company (Dow).  As a result,  HSB's interest in Radian LLC was
classified as a discontinued operation in 1997.



The  effective  tax rate on  income  from  continuing  operations  for the first
quarter was 30 percent  compared to 32 percent for the comparable  prior period.
Typically tax rate fluctuations  occur as underwriting and engineering  services
results  and  realized  gains  change the mix of pre-tax  income  between  fully
taxable earnings and tax preferred earnings that can be obtained by investing in
certain instruments.  In the first quarter of 1998 the taxes associated with the
sale of IRI contributed to the higher effective tax rate. The Company  continues
to  manage  its  use of tax  advantageous  investments  to  maximize  after  tax
earnings.


Recent Accounting Developments
------------------------------

The  Accounting  Standards  Executive  Committee  of the  American  Institute of
Certified  Public  Accountants  (AcSEC)  recently  issued  three  Statements  of
Position (SOP) which became  effective for fiscal years beginning after December
15,  1998;  SOP  97-3,  "Accounting  by  Insurance  and  Other  Enterprises  for
Insurance-Related  Assessments", SOP 98-1, "Accounting for the Costs of Computer
Software  Developed or Obtained for Internal Use",  and SOP 98-5,  "Reporting on
the Costs of Start-Up  Activities".  Because the Company's  accounting  policies
were in compliance with the provisions of the SOP's, the  implementation  of the
SOP's had no impact upon the results of operations,  financial condition or cash
flows.

In June 1998, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial  Accounting  Standard  (SFAS) No. 133,  "Accounting  for Derivative
Instruments and Hedging Activities".  This statement establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments embedded in other contracts, and for hedging activities. It requires
that all  derivatives  be  recognized  as either  assets or  liabilities  in the
statement of financial  position and that such  instruments  be measured at fair
value. In addition, all hedging relationships must be designated, reassessed and
documented  pursuant  to the  provisions  of SFAS No.  133.  This  statement  is
effective  for  fiscal  years   beginning  after  June  15,  1999.  The  Company
anticipates  that the adoption of the provisions of SFAS No. 133 will not have a
material impact on results of operations, financial condition or cash flows.

In October 1998,  AcSEC issued SOP 98-7,  "Deposit  Accounting:  Accounting  for
Insurance and Reinsurance  Contracts That Do Not Transfer  Insurance  Risk." The
SOP identifies  several methods of deposit  accounting and provides  guidance on
the application of each method.  This SOP is effective for financial  statements
for fiscal years  beginning  after June 15, 1999.  Currently  the Company is not
party to any contracts which do not comply with the risk transfer  provisions of
SFAS No. 113,  "Accounting and Reporting for Reinsurance of  Short-Duration  and
Long-Duration  Contracts," and,  therefore,  does not anticipate the adoption of
SOP 98-7 will  have a  material  impact  on  results  of  operations,  financial
condition or cash flows.

                                       13
<PAGE>


Insurance Operations
--------------------

Insurance  operations include the insurance results of The Hartford Steam Boiler
Inspection and Insurance  Company  (HSBIIC),  HSB Engineering  Insurance Limited
(EIL), The Boiler Inspection and Insurance  Company of Canada (BI&I),  The Allen
Insurance  Company,  Ltd.,  HSB of  Connecticut,  HSB  of  Texas,  and  HSBIIC's
participation in HSB Industrial Risk Insurers and various other pools.

                                                         Quarter Ended
                                                            March 31
                                                            --------
                                                     1999              1998
                                                ---------------- ---------------

Gross earned premiums                             $  208.9         $  179.7
Ceded premiums                                       112.4             80.3
                                                ---------------- ---------------

Insurance premiums                                    96.5             99.4

Claims and adjustment expenses                        38.3             44.6

Underwriting, acquisition and other expenses          46.6             44.3
                                                ---------------- ---------------

Underwriting gain                                $    11.6         $   10.5
                                                ================ ===============


Loss ratio                                            39.7%            44.9%

Expense ratio                                         48.0%            44.3%
                                                ---------------- ---------------

Combined ratio                                        87.7%            89.2%
                                                ================ ===============


Gross earned premiums increased 16.2 percent from the comparable period in 1998.
This was primarily  attributable  to an increase in premiums from HSB Industrial
Risk Insurers of $13.0 million reflecting the Company's role as direct writer of
that business.  Other growth includes the impact of certain  commercial books of
business  acquired in mid 1998.  Gross  earned  premiums  representing  coverage
outside the U.S.  for non HSB  Industrial  Risk  Insurers  business  decreased 4
percent in the first  quarter  from the  comparable  period in 1998.  In certain
areas of the Company's direct domestic and international businesses,  the market
is experiencing price erosion.  HSB will not write business at rates which would
lessen our ability to maintain underwriting profit.

Increases in ceded premium of 40 percent in the current  quarter were the result
of both the HSB Industrial  Risk Insurers  arrangement  and related  reinsurance
with ERC, and the Company's  reinsurance  programs  which now utilize more quota
share  reinsurance on certain of our books of business.  We anticipate these new
reinsurance  contracts and the HSB Industrial Risk Insurers  arrangement,  along
with growth in our  commercial  business,  will  continue to result in growth in
gross earned premium but lower growth in net earned premium.

The loss ratio  decreased from 44.9 percent in the first quarter of 1998 to 39.7
percent in the current  quarter.  First  quarter 1998  results were  impacted by
severe  ice  storms  in  Canada.   These  storms  impacted  the  loss  ratio  by
approximately 6 percentage points.  Gross claims and adjustment expenses for the
first quarter 1999 and 1998 were $117.6 million and $87.7 million, respectively.
The  increase  over 1998 was  primarily  the result of three large losses in our
international business which were largely reinsured.

                                       14
<PAGE>

The expense  ratio  increased  from 44.3 percent in the first quarter of 1998 to
48.0 percent in the current quarter as the company purchased more reinsurance.

The  following  information  summarizes  net earned  premiums  and net income by
reportable insurance segment:

                                                  Quarter Ended
                                                     March 31
                                                     --------    
                                             1999              1998
                                             ----              ----
Commercial:
   Net earned premiums                   $   80.3          $   68.1
   Net income                                 1.4               1.3

Global Special Risks:
   Net earned premiums                   $   15.7          $   30.0
   Net income                                 5.2               4.2

Net earned  premiums in the  Commercial  segment rose $12.2 million in 1999 from
the comparable  period in 1998 due to strong growth in client  company  billings
and  integration  of the  Kemper  portfolio.  Net  income  was  depressed  by an
adjustment to commission  expense,  higher system costs related to Year 2000 and
increased frequency of small claims.

Global Special Risks net earned premiums declined $14.3 million in 1999 from the
comparable  period in 1998 due to price  erosion and the  maintenance  of strict
underwriting standards, coupled with changes in reinsurance programs. Net income
increased, however, due to favorable claims experience in comparison to 1998.


Engineering Services Operations
-------------------------------
                                                     Quarter Ended
                                                       March 31
                                                       --------
                                               1999               1998
                                               ----               ----

Engineering services revenues              $   27.6            $   19.7
Engineering services expenses                  25.2                17.9
                                        ------------------- ------------------

Operating gain                             $    2.4            $    1.8
                                        =================== ==================

Net margin                                      8.4%                8.9%

Engineering  services  operations  include  the results of  HSBIIC's,  EIL's and
BI&I's  engineering   services,   HSB  Reliability   Technologies  (HSBRT),  HSB
Professional Loss Control, HSB International, Solomon Associates, Inc. (SAI) and
the Company's interest in Integrated Process Technologies, LLC.

Engineering  services  revenues  increased  $7.9  million  in the first  quarter
compared to the same period in 1998. The growth in revenues was primarily due to
SAI which was acquired in April 1998 and EIL's revenues generated through recent
acquisitions. The decline in operating margin from the previous periods reflects
operating costs incurred to develop new products and in new start up operations.

                                       15
<PAGE>

The  company  continues  to  focus on  identifying  and  evaluating  acquisition
candidates in the niche  engineering  management  consulting  service  business,
primarily  in  process  industries,   in  order  to  expand  or  complement  its
engineering service capabilities.


Investment Operations
---------------------
                                              Quarter Ended
                                                March 31
                                                --------
                                        1999                1998
                                --------------------- -----------------

Net investment income                 $15.7                 $15.2
Realized investment gains               7.1                   3.2
                                --------------------- -----------------
Pretax income from
investment operations                 $22.8                 $18.4
                                ===================== =================

Income from investment  operations for the first quarter  increased $4.4 million
primarily due to realized  investment  gains  resulting from  repositioning  the
investment portfolio due to market fluctuations.

The Company's  investment  strategy  continues to be to maximize total return on
the investment  portfolio through  investment  income and capital  appreciation.
Investment  strategies  for any given year are  developed  based on many factors
including  operational  results,  tax  implications,   regulatory  requirements,
interest rates, dividends to stockholders and market conditions.  The investment
portfolio  includes a wide variety of high quality  equity  securities  and both
domestic and foreign fixed  maturities.  The Company continues to manage its use
of tax advantageous  investments to maximize after-tax investment earnings.  The
Company does not engage in cash flow underwriting; it seeks to have underwriting
profit each year.

Statements of Comprehensive Income
----------------------------------

In  addition  to the impact of HSB's  results of  operations,  the  Consolidated
Statements of  Comprehensive  Income  displays the effects of price movements on
HSB's  invested  assets.  As a result of the market  corrections  and subsequent
rebounds,  cumulative holding gains, net of taxes, for the first quarter of 1999
decreased $12.3 million as compared to the increase of $17.6 million in the same
period in 1998.

Liquidity and Capital Resources
-------------------------------
                                                        Balances at
                                               March 31           December 31
                                                 1999                 1998
                                             ----------------- -----------------

Total assets                                   $ 2,113.0            $ 2,144.0
Short-term investments                              90.6                 62.3
Cash and cash equivalents                            3.7                 18.3
Short-term borrowings                               26.2                 21.0
Capital securities of subsidiary Trust I           108.9                108.9
Capital securities of subsidiary Trust II          300.0                300.0
Common shareholder's equity                        414.2                419.3

Liquidity refers to the Company's  ability to generate  sufficient funds to meet
the cash requirements of its business operations. HSB is a holding company whose
principal  subsidiary is HSBIIC. HSB relies on investment  income,  primarily in
the form of  dividends  from  HSBIIC,  in order to meet its short and  long-term
liquidity  requirements  including  the  service  requirements  for its  capital
securities.  The  Company  receives  a  regular  inflow  of cash  from  maturing
investments,  engineering  services  and  insurance  operations.  The mix of the
investment  portfolio is managed to respond to expected  claim pay-out  patterns

                                       16
<PAGE>

and the service  requirements  of the  Company's  capital  securities.  HSB also
maintains a highly liquid  short-term  portfolio to provide for  immediate  cash
needs and to offset a portion of  interest  rate risk  relating  to the  Capital
Securities of subsidiary Trust I.

Cash  provided  from  operations  was $22.4 million in the first three months of
1999 compared to $15.4  million for the same period in 1998.  Overall cash flows
in 1998 were  significantly  impacted by the  investment  of  proceeds  from the
convertible  capital  securities  issued in late  December 1997 and the sales of
Radian and IRI in 1998.

Capital resources consist of shareholders'  equity,  capital securities and debt
outstanding,  and represent  those funds deployed or available to be deployed to
support business  operations.  Common  shareholders' equity of $414.2 million at
March 31, 1999,  decreased by $5.1 million since December 31, 1998. The decrease
primarily reflects  comprehensive income of $8.7 million less dividends of $12.1
million and share repurchases of $2.2 million.

At March 31, 1999,  HSBIIC had  significant  short-term and long-term  borrowing
capacity.  HSBIIC  is  currently  authorized  to  issue  up to  $75  million  of
commercial  paper.  Commercial  paper  outstanding  at  March  31,  1999 was $25
million.

HSBIIC has been involved in three significant  claim-related disputes concerning
the extent to which  certain  explosion  events were  insured  under  boiler and
machinery  coverages of HSBIIC.  Information  regarding  these disputes has been
provided in previous 10-K and 10-Q reports.  Current  rulings in all three cases
confirm  HSBIIC's  long-standing  position that HSBIIC policies do not cover the
explosion  events that occurred in those cases.  In one case the parties settled
their dispute  following  Summary Judgment rulings of the Federal District Court
for the State of Illinois;  in a second case, a decision of an arbitration panel
has been confirmed by the Superior Court of the State of  Connecticut;  and in a
third case,  the Federal  Court of Appeals for the Seventh  Circuit has remanded
the matter for entry of a judgment in HSBIIC's favor.

The  Company  writes  business in European  markets  primarily  through its U.K.
subsidiary,  EIL. The adoption of a common  currency (the euro) by eleven of the
fifteen  member  countries  of the  European  Union on  January  1,  1999 is not
expected to result in a  substantial  change in the  business  or a  significant
increase in costs in the short term. In part,  this is due to the fact that much
of the business is U.S.  dollar  denominated.  The U.K. is not a first wave euro
country and as such the primary impact will be in Spain and the Irish  Republic.
Over time, if the U.K. adopts the euro as its currency,  there may be more of an
impact,  however,  the number of  affected  transactions  are such that a manual
backup system is practicable.  The Company will continue to monitor developments
and assess impacts on markets, pricing, and reporting.


Year 2000
---------

The following Year 2000 statements  constitute a Year 2000 Readiness  Disclosure
within the meaning of the Year 2000 Information and Readiness  Disclosure Act of
1998.

Year 2000 Plan and State of Readiness
-------------------------------------

In 1996, the Company began a  comprehensive  effort to assess and address issues
affecting the Company,  which related to the inability of computer equipment and
embedded computer chips to distinguish  between the year 1900 and the year 2000.
As has been well publicized, many computer systems and date controlled equipment
may cease to function or may  function in a different  manner when the year 2000
arrives because they are programmed to recognize only the last two digits of the
year.

                                       17
<PAGE>

As a part of this effort, the Company established a Year 2000 Program to address
four key areas: (i) applications software, primarily consisting of the Company's
policy management,  claims,  financial  recording and reporting,  human resource
systems, and engineering databases and systems;  (ii)  infrastructures,  such as
mainframe and corporate servers,  workstations and networking components;  (iii)
embedded  technology in facilities in which the Company  conducts its operations
and in testing equipment used by the Company's  engineering  staff; and (iv) key
business  partners  and  suppliers.  In  addition,  the  Company  is  evaluating
potential  coverage  exposures  arising  out of the Year 2000 and its  impact on
insured  equipment.  The Company's  Year 2000 Program  consists of six partially
overlapping  stages for the key areas listed above: (i) assessment and analysis;
(ii) development, renovation and replacement; (iii) implementation; (iv) testing
and  certification;  (v) contingency  planning;  and (vi) audit and review.  The
Company is using members of its internal information technology staff as well as
external  consultants  and  programmers to complete  various tasks in connection
with its Year 2000 Program and is currently on schedule.

The Company has  completed  the  assessment  and  analysis  phase for its policy
management,  claims, and financial  recording and reporting,  and human resource
systems and engineering databases and systems. The Company has largely completed
the  development,  renovation,  replacement  and  implementation  phases  as  of
December 31, 1998 with the exception of human resource and certain  non-critical
financial reporting and engineering systems,  which are expected to be compliant
by mid-1999.  We have substantially  completed Year 2000 testing for our current
policy  management,  financial  application  and  engineering  systems.  We will
continue  to Year  2000  test our  claims,  human  resource  systems  and  other
supporting applications throughout the second quarter of 1999.

The Company has  completed  the  assessment  and analysis  phase with respect to
infrastructure  items.  The  mainframe  is Year 2000  compliant  and the Company
expects to complete the migration to Year 2000 compliant  servers and supporting
hardware and software by September 1999.  Replacement of the various  components
of non-compliant  workstations  and peripheral  equipment also is expected to be
completed by  September  1999.  Many of the  third-party  software  applications
utilized  by the  Company  in its  desktop  environment  are  already  Year 2000
compliant.  The Company  expects to complete the  installation of such compliant
programs on virtually all of its workstations by September 1999.

In the area of  embedded  chip  technology,  the  Company's  principal  exposure
relates to the  prevalence of such  technology in office  buildings in which the
Company  leases space for conducting  its business  operations.  The Company has
sent  questionnaires to the leasing vendors for all of its principal  facilities
with respect to Year 2000  readiness  and has received  assurances  of readiness
from most of its vendors.

The Company has  identified  and is currently in the process of  contacting  key
suppliers of services and business  partners,  such as client companies,  agents
and brokers,  with whom the Company has significant  business  relations and who
may either  electronically  provide to, or receive  from,  the  Company  certain
financial and other  information.  As the Company  receives  responses  from its
suppliers and business partners,  it will update its assessment of the potential
impact  on the  Company  of such  parties'  Year  2000  state of  readiness  and
remediation  plans and conduct  renovations  and/or  replacement  and compliance
testing, as appropriate.

The Company is relying upon Year 2000 readiness statements of other entities and
has not independently verified the accuracy of such statements.

Costs
-----

It is currently  estimated that the Company's  aggregate  spending in connection
with  the  Year  2000  Program  will be in the  range  of $27  million  of which
approximately $22.7 million has been expended through March 31, 1999. Certain of
these costs are being expensed as they are incurred and are being funded through
operating  cash flow.  The Company has expensed $5.1  million,  $1.5 million and
$0.2  million in 1998,  1997 and 1996,  respectively,  and $2.5  million for the
first three months of 1999. It is estimated  that  

                                       18
<PAGE>

expenditures  of $3.6  million  for the  remainder  of 1999 will be  expensed as
incurred.  The remainder of the $27 million estimate relates to systems that the
Company  anticipated  replacing in the normal course of  information  technology
development but the timetable for which was accelerated in  contemplation of the
Year 2000 event. Costs of replacement and renovation of information  systems and
infrastructure that would have occurred in the normal course of business without
the advent of the Year 2000 event are excluded from these  amounts.  The current
estimate also does not include any costs associated with the  implementation  of
contingency plans that are in the process of being developed.


The Company does not expect the costs  relating to its Year 2000 Program to have
a  material  effect  on  its  results  of  operations,  liquidity  or  financial
condition.  However,  the  Year  2000  Program  is an  ongoing  process  and the
estimated costs, as well as the estimated completion dates for various phases of
the program, are subject to change.

Risks
-----

The failure of one or more critical  software  applications or components of the
Company's  infrastructure  to be Year  2000  compliant  could  cause a  material
disruption in the normal business  operations of the Company.  Such  disruptions
could include the inability to process  policies,  register and collect premiums
and  engineering  receivables,   process  claims  or  schedule  inspections  and
engineering services. Due to the difficulty in estimating the scope and duration
of such  failures,  the Company is unable to  determine at this time whether the
consequences  of such  failures  would have a material  impact on the  Company's
results  of  operations,   liquidity,  or  financial  condition.  Moreover,  the
Company's  operations are  interdependent  with systems of business partners and
service  providers,  such  as  financial  institutions,   communication  service
providers and utilities,  over which the Company has no control.  The failure of
one or more of such  business  partners  or  service  providers  to be Year 2000
compliant  could have a material  adverse  impact on the Company.  However,  the
Company  believes  that  with the  implementation  of its Year 2000  Program  as
scheduled, including the contingency plans discussed below, the risk of material
disruptions to its normal business operations should be significantly reduced.

As an  insurance  company,  the Company  maintains a  significant  portfolio  of
investments in cash, short-term fixed income, and equity securities. Inasmuch as
the advent of the Year 2000 may cause events, business interruptions and altered
economic facts and circumstances,  the value of the Company's investments may be
affected  favorably or  unfavorably.  The Company is selectively  monitoring the
Year 2000  compliant  status of the corporate  issuers of the  securities in its
investment  portfolio  primarily through reviewing public disclosure  documents.
State government and municipal bonds held by the Company are general obligations
and/or are  credit-enhanced and therefore the Company does not perceive there to
be a  significant  credit risk with these  securities in the absence of a severe
Year  2000  disruption  affecting  governments  and  businesses  generally.   An
immaterial  portion of the Company's  portfolio is invested in non-public issues
where public  disclosure  documents are  unavailable.  Due to the  difficulty in
estimating  the scope and  duration  of such  events,  the  Company is unable to
determine at this time whether the consequences of such developments will have a
material  impact on the Company's  investment  portfolio and  therefore,  on the
Company's results of operations, liquidity or financial condition.


Contingency Plans
-----------------

As a component of the Year 2000 Program, the Company is concurrently  developing
contingency  plans  intended to mitigate  the  possible  disruption  of business
operations  arising out of the Year 2000 event. These plans will be continuously
refined during 1999 as the Company completes  compliance testing on its internal
applications  software  and  infrastructure  and further  assesses the Year 2000
readiness  status  of its  business  partners.  Contingency  plans  may  include
securing  back-up  power  for the  Company's  data  center,  manual  processing,
short-term  fixes to non-compliant  programs or business partner  interfaces and
modifying the Company's asset selection criteria for its investment activities.

                                       19
<PAGE>

Insurance Coverage Issues
-------------------------

The Company continues to evaluate the potential  coverage  exposures arising out
of the Year 2000 event and its  impact on insured  equipment.  The  Company  has
prepared an endorsement to its equipment  breakdown forms which  reiterates that
coverage  is  not  provided  for  the  inherent   inability  of  computers   and
computerized  equipment to properly recognize a particular date or time, such as
the year 2000.  The  endorsement  is being  included on all equipment  breakdown
policies.  In addition,  a notice reiterating the Company's coverage intent with
respect to Year 2000 exposures is being sent to  policyholders.  The Company has
filed a similar  endorsement  for use with its  all-risk  policy and  expects to
receive  approvals for use in all  jurisdictions.  Most of the insurers that the
Company  reinsures  for  equipment   breakdown   coverage  are  issuing  similar
endorsements  to  their   policies.   The  Company  is  conducting  an  on-going
communications   program  with  its  client  company   insurers  and  agents  to
disseminate to the ultimate policyholders its Year 2000 loss control suggestions
and policy coverage position.

Quantification of the Company's exposure to Year 2000 losses and loss adjustment
expenses  are not  reasonably  estimable at this time as  applicable  policy and
reinsurance  contract  wordings  have not been legally  tested in the context of
such losses.

Forward-Looking Statements
--------------------------

Certain statements contained in this report are forward-looking and are based on
management's  current  expectations.  Actual results may differ  materially from
such  expectations  depending on the outcome of certain  factors  described with
such forward-looking statements and other factors including: significant natural
disasters  and severe  weather  conditions;  changes in  interest  rates and the
performance  of the financial  markets;  changes in the  availability,  cost and
collectibility of reinsurance; changes in domestic and foreign laws, regulations
and taxes; the entry of new or stronger  competitors and the  intensification of
pricing  competition;  the loss of current  customers or the inability to obtain
new customers;  changes in the coverage  terms selected by insurance  customers,
including  higher  deductibles and lower limits;  the adequacy of loss reserves;
changes in asset  valuations;  consolidation  and restructuring in the insurance
industry;   changes  in  the  Company's   participation  in  joint  underwriting
associations,  and in  particular  its  arrangement  with  HSB  Industrial  Risk
Insurers; changes in the demand and customer base for engineering and inspection
services  offered by the Company,  whether  resulting from changes in the law or
otherwise, and other general market conditions.

                                       20
<PAGE>


PART II OTHER INFORMATION

Item 1 - Legal Proceedings

See Note 5 to Consolidated Financial Statements, Part I, Item 1


Item 6 - Exhibits and Reports on Form 8-K

(a)  Exhibits

     Exhibit 27.1 - Financial Data Schedule

     Exhibit 27.2 - Financial Data Schedule

(b)  Reports on Form 8-K

     (i)  Form 8-K dated January 25, 1999 reporting the fourth quarter 1998
          earnings.

     (ii) Form 8-K dated January 26, 1999 announcing the declaration of a 
          dividend of 42 cents per share payable on April 29, 1999.


                                       21
<PAGE>


                                   SIGNATURES

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.

Date:   May 17, 1999          By:      /s/  Saul L. Basch
                                            Saul L. Basch
                                            Senior Vice President, Treasurer 
                                            and Chief Financial Officer


Date:   May 17, 1999          By:      /s/  Robert C. Walker
                                            Robert C. Walker
                                            Senior Vice President and
                                            General Counsel


                                       22