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 June 30, 2000

                                       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 July 31, 2000: 29,031,517.


<PAGE>


                                 HSB GROUP, INC.

                                      INDEX


PART I   FINANCIAL STATEMENTS                                            PAGE

      Item 1 - Financial Statements

      Consolidated Statements of Operations for the Quarters
         ended June 30, 2000 and 1999 and the Six Months ended
         June 30, 2000 and 1999 (unaudited)................................3

      Consolidated Statements of Comprehensive Income for
         the Quarters ended June 30, 2000 and 1999 and the Six Months
         ended June 30, 2000 and 1999 (unaudited)..........................4

      Consolidated Statements of Financial Position as of
         June 30, 2000 (unaudited) and December 31, 1999...................5

      Consolidated Statements of Cash Flows for the Six
         Months ended June 30, 2000 and 1999 (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..........................................22
      Item 4 - Submission of Matters to a Vote of Security Holders........22
      Item 6 - Exhibits and Reports on Form 8-K...........................22

SIGNATURES................................................................23


                                       2
<PAGE>



ITEM 1 - FINANCIAL STATEMENTS
                                                     HSB GROUP, INC.
                                          Consolidated Statements of Operations
                                                        Unaudited
                                           (in millions, except per share data)

<TABLE>
<CAPTION>
                                                        Quarter                  Six Months
                                                    Ended June 30,             Ended June 30,
                                                    --------------             --------------
                                                   2000       1999            2000         1999
                                             -------------- ----------    ----------    --------
<S>                                             <C>            <C>           <C>          <C>
Revenues:
   Gross earned premium                         $176.4         $206.8        $358.5       $415.7
   Ceded premiums                                 77.0          113.1         167.8        225.5
                                             -------------  ----------    ----------    --------
   Insurance premiums                             99.4           93.7         190.7        190.2
   Engineering services                           40.2           27.8          77.2         55.4
   Net investment income                          15.6           16.6          30.5         32.3
   Realized investment gains                      10.2           10.2          23.5         17.3
                                             -------------- ----------    ----------    --------
     Total revenues                              165.4          148.3         321.9        295.2
                                             -------------- ----------    ----------    --------

Expenses:
   Claims and adjustment                          38.1           37.9          76.9         76.2
   Policy acquisition                             21.7           21.3          41.5         43.9
   Underwriting and inspection                    30.8           24.2          57.4         48.2
   Engineering services                           37.6           25.6          71.6         50.8
   Interest                                        0.5            0.6           1.1          1.0
                                             -------------- ----------    ----------    --------
     Total expenses                              128.7          109.6         248.5        220.1
                                             -------------- ----------    ----------    --------

Income before income taxes and
   distributions on capital securities          $ 36.7         $ 38.7        $ 73.4       $ 75.1

Income taxes (benefit):
   Current                                        13.5           11.1          29.6         19.3
   Deferred                                       (1.2)           0.3          (5.1)         3.0
                                             -------------- ----------    ----------    --------
     Total income taxes                         $ 12.3         $ 11.4        $ 24.5       $ 22.3

Distribution on capital securities
   of subsidiary trust, net of income tax
   benefits of $2.5, $2.4, $5.0 and $4.8           4.7            4.5           9.4          9.0
                                             -------------- ----------    ----------    --------

Net income                                      $ 19.7         $ 22.8        $ 39.5       $ 43.8
                                             ============== ==========    ==========    ========
Per share data:

Net income per common share-basic               $  0.68        $  0.79       $  1.36      $  1.51
                                             ============== ===========    ==========    ========
Basic weighted-average common
  shares outstanding                              28.8           29.0          29.0         29.0

Net income per common share-assuming
  dilution                                      $  0.67        $  0.76       $  1.35      $  1.46
                                             ============== ===========    ==========    ========
Diluted weighted-average common
  shares outstanding                              34.1           34.8          34.3         34.6

Dividends declared per share                    $  0.44        $  0.42       $  0.88      $  0.84
</TABLE>

See Notes to Consolidated Financial Statements.

                                       3
<PAGE>





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


<TABLE>
<CAPTION>
                                                                 Quarter Ended                   Six Months Ended
                                                                    June 30,                         June 30,
                                                        --------------------------------- -----------------------------
                                                             2000             1999           2000             1999
                                                        ---------------    ------------ --------------  ---------------
<S>                                                          <C>              <C>            <C>             <C>
Net income                                                   $19.7            $22.8          $39.5           $43.8
Other comprehensive income, net of tax:
   Unrealized gains (losses) on securities:
     Unrealized holding gains (losses) arising during
       the period, net of taxes (benefits) of $2.4;
       ($0.2); $4.7; and ($4.4)                                9.8             (0.3)          13.7            (8.3)
     Add : reclassification adjustments for gains
       included in net income                                 (5.6)            (6.6)         (14.2)          (11.2)
                                                        ---------------    ------------ --------------  ---------------

       Total unrealized gains on securities                    4.2             (6.9)          (0.5)          (19.5)
   Foreign currency translation adjustments, net of
     income taxes                                             (0.5)             0.6           (0.8)            0.9
                                                        ---------------    ------------ --------------  ---------------
   Other comprehensive income                                  3.7             (6.3)          (1.3)          (18.6)
                                                        ===============    ============ ==============  ===============
   Comprehensive income                                      $23.4            $16.5          $38.2           $25.2
                                                        ===============    ============ ==============  ===============
</TABLE>






















See Notes to Consolidated Financial Statements.

                                       4
<PAGE>




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

<TABLE>
<CAPTION>
                                                                 June 30,
                                                                   2000               December 31,
                                                                (Unaudited)               1999
                                                            --------------------   -------------------
<S>                                                               <C>                    <C>
Assets:
   Cash and cash equivalents                                      $66.3                  $73.0
   Short-term investments, at cost                                 40.9                   53.5
   Fixed maturities, at fair value
     (cost - $527.2; $545.7)                                      471.8                  489.8
   Equity securities, at fair value
     (cost - $324.6;  $316.6)                                     384.4                  381.8
                                                            --------------------   -------------------
     Total cash and invested assets                               963.4                  998.1

   Reinsurance assets                                             605.2                  850.3
   Insurance premiums receivable                                   70.6                  104.4
   Engineering services receivable                                 45.8                   39.1
   Fixed assets                                                    55.5                   58.2
   Prepaid acquisition costs                                       37.7                   52.9
   Capital lease                                                   14.6                   13.8
   Deferred income taxes                                            6.9                    -
   Other assets                                                   153.5                  146.4
                                                            --------------------   -------------------
     Total assets                                              $1,953.2               $2,263.2
                                                            ====================   ===================

Liabilities:
   Unearned insurance premiums                                   $272.2                 $420.1
   Claims and adjustment expenses                                 674.4                  782.3
   Short-term borrowings                                           30.8                   41.5
   Long-term borrowings                                             -                     25.1
   Capital lease                                                   28.9                   27.8
   Deferred income taxes                                            -                      2.8
   Dividends and distributions on
    capital securities                                             23.8                   24.0
   Ceded reinsurance payable                                       23.0                   66.3
   Other liabilities                                              110.8                   87.8
                                                            --------------------   -------------------
     Total liabilities                                          1,163.9                1,477.7
                                                            --------------------   -------------------

Company obligated mandatorily redeemable
    capital securities of subsidiary Trust I
    holding solely junior subordinated
    deferrable interest debentures of the Company,
    net of unamortized discount of $1.0
    in 2000 and 1999                                              107.0                  109.0

Company obligated mandatorily redeemable
    convertible capital securities
    of subsidiary Trust II holding
    solely junior subordinated deferrable
    interest debentures of the Company                            300.0                  300.0

Shareholders' equity:
   Common stock (stated value; shares authorized
     50.0; shares issued and outstanding 28.8; 29.1)               10.0                   10.0
   Additional paid-in capital                                      35.1                   36.2
   Accumulated other comprehensive income                          (3.2)                  (1.9)
   Retained earnings                                              347.3                  339.1
   Benefit plans                                                   (6.9)                  (6.9)
                                                            --------------------   -------------------
    Total shareholders' equity                                    382.3                  376.5
                                                            --------------------   -------------------
    Total                                                      $1,953.2               $2,263.2
                                                            ====================   ===================

   Shareholders' equity per common share                          $13.28                 $12.95
</TABLE>

See Notes to Consolidated Financial Statements.

                                       5
<PAGE>




                                 HSB GROUP, INC.
                      Consolidated Statements of Cash Flows
                                    Unaudited
                                  (in millions)
                                                                Six Months
                                                              Ended June 30,
                                                        ------------------------
                                                             2000          1999
                                                        -------------- ---------
Operating Activities:
Net income                                                 $ 39.5       $  43.8
Adjustments to reconcile net income to net
 cash provided by operating activities:
   Depreciation and amortization                             10.4          10.2
   Deferred  income taxes (benefit)                          (5.1)          3.0
   Realized investment gains, net                           (23.5)        (17.3)
   Distributions on capital securities                       14.4          13.8
   Change in balances
     Insurance premiums receivable                           33.8          25.0
     Engineering services receivable                         (6.7)         (3.3)
     Prepaid acquisition costs                               15.2          (4.0)
     Reinsurance assets                                     245.1         (30.4)
     Unearned insurance premiums                           (147.9)        (51.1)
     Claims and adjustment expenses                        (107.9)         41.9
     Ceded reinsurance payable                              (43.3)         (3.0)
     Other                                                   15.0         (18.4)
                                                        -------------- ---------
       Cash provided by operating activities                 39.0          10.2
                                                        -------------- ---------

Investing Activities:
Fixed asset additions, net                                   (4.1)         (7.4)

Investments:
   Sale of short-term investments, net                       12.6          12.9
   Purchase of fixed maturities                             (63.4)        (86.6)
   Proceeds from sale of fixed maturities                    64.0          84.6
   Redemption of fixed maturities                            14.6           8.3
   Purchase of equity securities                           (107.6)       (168.0)
   Proceeds from sale of equity securities                  125.3         180.3
                                                        -------------- ---------
     Cash provided by investment activities                  41.4          24.1
                                                        -------------- ---------

Financing Activities:
(Decrease) increase in short-term borrowings                (10.7)         31.4
Repayment of long-term borrowings                           (25.1)          -
Dividends and distributions on capital securities           (40.0)        (38.2)
Reacquisition of stock                                       (9.6)         (2.2)
Exercise of stock options                                     0.1           3.9
Reacquisition of Company obligated mandatorily
  redeemable capital securities of
  subsidiary Trust I                                         (1.8)           -
                                                        -------------- ---------
     Cash used in financing activities                      (87.1)         (5.1)
                                                        -------------- ---------
   Net (decrease) increase in cash and
     cash equivalents                                        (6.7)         29.2

   Cash and cash equivalents at beginning
     of period                                               73.0          18.3
                                                        -------------- ---------
   Cash and cash equivalents at end of period              $ 66.3       $  47.5
                                                        ============== =========
Interest paid                                              $  2.5       $   1.8
                                                        -------------- ---------
Federal income tax paid                                    $ 18.1       $  12.2
                                                        -------------- ---------

See Notes to Consolidated Financial Statements.

                                       6
<PAGE>




                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (In millions, except per share amounts)
                                   (Unaudited)
1.       General

         The interim  consolidated  financial  statements in this report present
         the  consolidated  accounts  of HSB Group,  Inc.  and its  subsidiaries
         (collectively,  HSB or the Company).  They 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 1999 Annual Report.


2.       Industrial Risk Insurers

         The joint  underwriting  association  that was known as HSB  Industrial
         Risk Insurers is now known as Industrial Risk Insurers (IRI), effective
         January 1, 2000. The reinsurance  agreements  effective January 1, 1998
         between the Hartford  Steam Boiler  Inspection  and  Insurance  Company
         (HSBIIC),  Employers Reinsurance  Corporation (ERC) and Industrial Risk
         Insurers were  terminated  with respect to loss or liabilities  arising
         out of  occurrences  taking  place on or after  January 1,  2000.  As a
         result,  HSBIIC no longer retains 85 percent of the equipment breakdown
         insurance  and 15 percent of the  property  insurance  of the  combined
         insurance portfolio for risks arising on or after January 1, 2000.

         Concurrent with the termination of the reinsurance agreements,  HSBIIC,
         ERC and IRI also  replaced the  operating  agreement  dated  January 1,
         1998. The new agreement, effective January 1, 2000, calls for HSBIIC to
         retain 0.5 percent membership share in IRI with the ability to increase
         its total share up to a maximum of 10 percent,  at no cost, at HSBIIC's
         option.  In addition,  the new agreements also establish an arrangement
         for HSB to  perform  equipment  breakdown  engineering  and  inspection
         services for clients of IRI.


3.        Recent Accounting Developments


         In June 1998, the Financial  Accounting  Standards  Board (FASB) issued
         Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
         for Derivative Instruments and Hedging Activities" subsequently amended
         by SFAS No. 137. 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 the
         Company for the first quarter of 2001.  Based on the Company's  current
         investment  policies and practices,  the Company  anticipates  that the
         adoption of the  provisions of SFAS No. 133 will not have a significant
         effect 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 (SOP  98-7)."  SOP 98-7  identifies  several  methods  of  deposit
         accounting  and provides  guidance on the  application  of each method.
         This SOP became  effective  for financial  statements  for fiscal years
         beginning  after June 15, 1999.

                                       7
<PAGE>

          The adoption  and impact of SOP 98-7 has not had a material  impact on
          the  Company's  results of  operations,  financial  condition  or cash
          flows, as the Company is not party to any contracts that do not comply
          with the risk  transfer  provisions of SFAS No. 113,  "Accounting  and
          Reporting  for  Reinsurance  of   Short-Duration   and   Long-Duration
          Contracts."


4.       Legal Proceedings

         The Company is involved in various  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 litigation, will
         have a material  adverse  impact on the  results of  operations  or the
         financial position of the Company.

5.       Earnings per Share

<TABLE>
<CAPTION>
                                                     Quarter Ended                        Six Months Ended
                                                     June 30, 2000                         June 30, 2000
                                                     -------------                        ----------------
                                            Income      Shares     Per            Income       Shares    Per
                                                                   Share                                 Share
                                            ------      ------     -----          ------       ------    -----
           <S>                              <C>            <C>     <C>            <C>          <C>       <C>

           Net Income                       $ 19.7                                $ 39.5

           Basic Earnings per Share:
           Income available to common
               shareholders                 $ 19.7                                $ 39.5
           Weighted average common
               shares outstanding                          28.8                                29.0
           Earnings per Share  - basic                             $ 0.68 *                              $ 1.36 *
           Effect of dilutive securities:
           After-tax distributions on
               convertible capital
               securities                    $ 3.4                                 $ 6.8
           Convertible capital securities                   5.3                                 5.3

           Diluted Earnings per Share:
           Net Income available to
               common shareholders and
               assumed  conversions         $ 23.1         34.1                   $ 46.3       34.3
           Earnings per Share - assuming
               dilution                                            $0.67 *                               $ 1.35 *

</TABLE>

          * Computation excludes rounding.

                                       8
<PAGE>




<TABLE>
<CAPTION>
                                                     Quarter Ended                        Six Months Ended
                                                     June 30, 1999                         June 30, 1999
                                                     -------------                        -----------------
                                            Income     Shares      Per            Income      Shares      Per
                                                                  Share                                  Share
                                            -------    ------     -----           ------      ------     -----
           <S>                              <C>         <C>      <C>            <C>            <C>      <C>

           Net Income                       $ 22.8                              $ 43.8

           Basic Earnings per Share:
           Income available to common
             shareholders                   $ 22.8                              $ 43.8
           Weighted average common
             shares outstanding                         29.0                                   29.0
           Earnings per Share - basic                            $0.79 *                                $ 1.51 *
           Effect of dilutive securities:
           After-tax distributions on       $  3.5                              $ 6.8
             convertible capital
             securities
           Convertible capital securities                5.3                                    5.3
           Stock options                                 0.5                                    0.3

           Diluted Earnings per Share:
           Net Income available to
             common shareholders and
             assumed  conversions           $ 26.3      34.8                    $ 50.6         34.6
           Earnings per Share -
             assuming dilution                                   $0.76 *                                $ 1.46 *

</TABLE>

          * Computation excludes rounding.


6.       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  worldwide.  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.

                                       9
<PAGE>



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


<TABLE>
<CAPTION>
                                                              Quarter Ended            Six Months Ended
                                                                 June 30                   June 30,
                                                        -----------------------  -------------------------
                                                         2000            1999         2000        1999
                                                        ---------   -----------  -----------  ------------
           <S>                                            <C>         <C>          <C>           <C>
           Revenues from continuing operations
           Insurance premiums:
           Commercial                                     $93.0        $  82.2      $ 181.0      $ 162.5
           Global Special Risks                             6.9           11.1         11.3         26.8
           Engineering services                            40.2           27.8         77.2         55.4
           Net investment income and realized
           investment gains                                25.8           26.8         54.0         49.6
                                                        ---------    -----------  -----------  ------------
           Total revenues from reportable segments        165.9          147.9        323.5        294.3
           Other segments                                  (0.5)           0.4         (1.6)         0.9
                                                        ---------    -----------  -----------  ------------
           Total revenues                                 $65.4        $ 148.3      $ 321.9      $ 295.2
                                                        =========    ===========  ===========  ============

           Net income (loss):
           Commercial                                      $5.8        $   4.5      $  10.2      $   5.9
           Global Special Risks                            (1.6)           2.7         (3.5)         7.9
           Engineering services                             1.2            1.2          2.5          2.5
           Investment                                      17.2           18.6         36.3         34.6
                                                        ---------    -----------  -----------  ------------
           Total net income from reportable segments       22.6           27.0         45.5         50.9
           Other segments                                  (0.2)          (1.5)        (0.5)        (1.5)
           Corporate account                                2.0            1.8          3.9          3.4
           Distributions on capital securities             (4.7)          (4.5)        (9.4)        (9.0)
                                                        ---------    -----------  -----------  -----------
           Net income                                     $19.7        $  22.8      $  39.5      $  43.8
                                                        =========    ===========  ===========  ============
</TABLE>


7.       Global Floating Rate Capital Securities

         On July 15,  1997,  a trust  sponsored  and wholly owned by the Company
         issued $110,000,000  aggregate liquidation amount of capital securities
         in a private  placement  and 3,403 shares of common  securities  to the
         Company,   the  proceeds  of  which  were  invested  by  the  trust  in
         $113,403,000   aggregate   principal   amount  of  the  Company's  debt
         securities.  On November  5, 1997,  an  exchange  offer was  commenced,
         pursuant  to which  the  capital  securities  originally  issued in the
         private  placement  were  exchanged  for capital  securities  that were
         registered  with the Securities and Exchange  Commission  (the "Capital
         Securities") and the debt securities were exchanged for debt securities
         that were registered  with the Securities and Exchange  Commission (the
         "Debt Securities" ).

         The Debt  Securities  represent  all of the  assets of the  trust.  The
         proceeds  from the  issuance  of the Debt  Securities  were used by the
         Company for general corporate purposes. The Debt Securities and related
         income statement  effects are eliminated in the Company's  consolidated
         financial  statements.  The  $113.4  million  principal  amount of Debt
         Securities accrue and pay cash distributions  quarterly in arrears at a
         variable  rate of LIBOR plus .91% of the stated  liquidation  amount of
         $1,000 per Debt Security, and are scheduled to mature on July 15, 2027.

                                       10
<PAGE>

         The Capital Securities accrue and pay cash  distributions  quarterly in
         arrears at a variable rate of LIBOR plus .91% of the stated liquidation
         amount  of  $1,000  per  Capital  Security.   The  terms  of  the  Debt
         Securities,  the  guarantee  of the Company with respect to the Capital
         Securities,  the Indenture and the Trust Agreement  together  provide a
         full guarantee of amounts due on the Capital Securities.

         The Capital Securities are mandatorily  redeemable upon the maturity of
         the Debt  Securities  on July 15, 2027, or earlier to the extent of any
         redemption by the Company of any Debt Securities.  The redemption price
         in either  such case will be $1,000 per share plus  accrued  and unpaid
         distributions to the date fixed for redemption.

         During the second quarter of 2000, the Company purchased  $2,000,000 in
         face amount of Capital Securities.

                                       11
<PAGE>





                  ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
                       OF CONSOLIDATED FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                  JUNE 30, 2000

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

Consolidated Overview
---------------------
<TABLE>
<CAPTION>
                                               Quarter Ended            Six Months Ended
                                                   June 30,                June 30,
                                               ---------------          ----------------
                                               2000       1999         2000        1999
                                               ----       ----         ----        ----
<S>                                          <C>        <C>           <C>         <C>
Revenues:

Gross earned premiums                        $ 176.4    $ 206.8       $ 358.5     $ 415.7
Ceded premiums                                  77.0      113.1         167.8       225.5
                                           ---------    -------       -------     -------

Insurance premiums                              99.4       93.7         190.7       190.2
Engineering services                            40.2       27.8          77.2        55.4
Net investment income                           15.6       16.6          30.5        32.3
Realized investment gains                       10.2       10.2          23.5        17.3
                                             -------    -------       -------     -------
   Total revenues                            $ 165.4    $ 148.3       $ 321.9     $ 295.2
                                             -------    -------       -------     -------
Pre-tax income                               $  36.7    $  38.7       $  73.4     $  75.1
Income taxes                                    12.3       11.4          24.5        22.3
Distributions on capital securities,
  net of tax                                     4.7        4.5           9.4         9.0
                                             -------    -------       -------     -------
    Net income                               $  19.7    $  22.8       $  39.5     $  43.8
                                              ------    -------       -------     -------
Net income per common share:

    Basic                                    $   0.68   $   0.79      $   1.36    $   1.51
    Assuming dilution                        $   0.67   $   0.76      $   1.35    $   1.46

</TABLE>

                                       12
<PAGE>


Overview of Results of Operations
---------------------------------

Total  revenues  for the second  quarter and first six months of 2000  increased
11.5 and 9.0  percent  from  comparable  periods  in 1999.  For  these  periods,
insurance premiums reflect growth in our Commercial  business offset by declines
in our  Global  Special  Risks  business.  The  growth in  Engineering  Services
revenues of 44.6  percent for the second  quarter and 39.4  percent year to date
reflects  the  impact of new  business  as well as  continued  growth in certain
engineering  affiliates  and  subsidiaries.  The year to date 2000  increase  in
realized  gains  reflect  the shift of a portion  of  investments  out of common
stocks. A portion of such proceeds was utilized to fund share repurchases.

The  Company's  pre-tax  earnings  decreased  5.2 and 2.3 percent for the second
quarter and first six months of 2000  compared to 1999.  The decrease in pre-tax
earnings  for the  second  quarter  and year to date 2000 was due  primarily  to
reduced  underwriting profits in our Global Special Risks business and lower net
investment income.

The effective  tax rates for the second  quarter and year to date 2000 were 33.5
percent  and 33.4  percent  compared to 29.5  percent  and 29.7  percent for the
comparable  prior  periods.  The  increases in the effective tax rates relate to
increases in non-deductible  goodwill,  fewer dividends received  deductions and
reduced  foreign  tax  credits.   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.  The Company  continues to
manage its use of tax advantageous investments to maximize after tax earnings.

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

In June 1998, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting for Derivative
Instruments and Hedging Activities"  subsequently  amended by SFAS No. 137. 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 the Company for
the first quarter of 2001. Based on the Company's  current  investment  policies
and practices,  the Company  anticipates  that the adoption of the provisions of
SFAS No.  133 will not have a  significant  effect  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 (SOP
98-7)." SOP 98-7 identifies  several methods of deposit  accounting and provides
guidance  on the  application  of each  method.  This SOP became  effective  for
financial  statements  for  fiscal  years  beginning  after June 15,  1999.  The
adoption and impact of SOP 98-7 has not had a material  impact on the  Company's
results of operations,  financial condition or cash flows, as the Company is not
party to any contracts  that do not comply with the risk transfer  provisions of
SFAS No. 113,  "Accounting and Reporting for Reinsurance of  Short-Duration  and
Long-Duration Contracts."

                                       13
<PAGE>


Insurance Operations
--------------------
<TABLE>
<CAPTION>

                                               Quarter Ended          Six Months Ended
                                                  June 30,                June 30,
                                               -------------          ----------------
                                            2000        1999          2000         1999
                                            -----        ----         ----         ----
<S>                                     <C>          <C>           <C>          <C>
Gross earned premiums                   $   176.4    $   206.8     $  358.5     $  415.7
Ceded premiums                               77.0        113.1        167.8        225.5
                                        ----------    --------     --------     --------
Insurance premiums                           99.4         93.7        190.7        190.2

Claims and adjustment expenses               38.1         37.9         76.9         76.2
Underwriting, acquisition and other
  expenses                                   52.5         45.5         98.9         92.1
                                        ----------   ---------     --------     ---------
Underwriting gain                       $     8.8    $    10.3     $   14.9     $   21.9
                                        ==========    ========     ========     =========
Loss ratio *                                 38.3%        40.5%        40.3%        40.1%
Expense ratio *                              52.8%        48.6%        51.9%        48.4%
                                        ----------     --------     --------    ---------
Combined ratio *                             91.1%        89.1%        92.2%        88.5%
                                        ==========     ========     ========    =========
</TABLE>

* Computation excludes rounding.


Insurance  operations  include the  underwriting  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.,  The  Hartford  Steam  Boiler  Inspection  and
Insurance  Company of  Connecticut,  The Hartford  Steam Boiler  Inspection  and
Insurance  Company of Texas,  and  HSBIIC's  participation  in  Industrial  Risk
Insurers (IRI) and various other pools.

Gross earned premiums in the second quarter and year to date 2000 decreased 14.7
and 13.8  percent  from the  comparable  periods in 1999.  The decrease in gross
earned premiums largely relates to declines in Global Special Risks gross earned
premiums  of  38.2  and  34.5   percent  for  the  quarter  and  year  to  date,
respectively.  These declines  primarily resulted from the Company's decision to
reduce its risk bearing position in IRI, effective January 1, 2000. The declines
in Global  Special  Risks were offset by  increases in  Commercial  gross earned
premiums  of  10.4  and  10.7   percent  for  the  quarter  and  year  to  date,
respectively,  which related  primarily to increases in our domestic  commercial
assumed equipment breakdown business.

Ceded  premiums in the second  quarter and year to date  decreased 32.0 and 25.6
percent to comparable periods in 1999. This is consistent with declines in gross
earned  premiums for the same periods and reflects  changes in the  structure of
some of the Company's  reinsurance  programs  which now utilize less quota share
reinsurance  on  certain  books  of  business  as  well  as  changes  in the IRI
agreements.

                                       14
<PAGE>

The loss ratio decreased from 40.5 percent in the second quarter of 1999 to 38.3
percent in the  current  quarter.  On a year to date  basis,  the loss ratio was
essentially  flat at 40.3 percent  compared to 40.1 percent in 1999. The changes
in the loss ratio reflects  improvement in the Commercial loss ratio,  offset by
increased  severity in equipment  breakdown failures in the Global Special Risks
large risk business in the second quarter and year to date 2000.

The expense ratio  increased  from 48.6 percent in the second quarter of 1999 to
52.8 percent in the current quarter,  and from 48.4 percent year to date in 1999
to 51.9 percent year to date in 2000.  The  increases in the expense  ratio were
primarily attributed to increases in underwriting and inspection expenses, which
increased  $6.6  million for the second  quarter and $9.2  million year to date.
These  increases were largely due to the reduced  management fees related to the
Company's  decision to reduce its risk bearing  position in IRI,  changes in the
Company's reinsurance programs which resulted in reduced ceding commissions, and
marketing incentive increases related to the growth in our Commercial  business.
Policy  acquisition  costs  were flat for the  quarter  and  lower  year to date
compared  to 1999  amounts  due  primarily  to the  reduction  in IRI net policy
acquisition  costs.  These  changes were offset,  however,  by increased  policy
acquisition costs in our Commercial business.

IRI  management  fees are reflected as expense  reductions to  underwriting  and
inspection  expenses and policy  acquisition  costs.  The expense ratio would be
approximately 4 percent higher for the quarter and year to date,  absent the IRI
arrangements.

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

                                  Quarter Ended              Six Months Ended
                                     June 30,                   June 30,
                                  -------------              ----------------
                                2000          1999         2000          1999
                                ----          ----         ----          ----
Commercial:
   Net earned premiums        $  93.0      $  82.2      $  181.0      $   162.5
   Net income                     5.8          4.5          10.2            5.9

Global Special Risks:
   Net earned premiums        $   6.9      $  11.1      $   11.3      $    26.8
   Net (loss) income             (1.6)         2.7          (3.5)           7.9


Net earned premiums in the Commercial segment rose $10.8 million or 13.1% in the
second  quarter and $18.5  million or 11.4% for the first six months of 2000 due
primarily to continued  growth in our domestic client company  business  through
our ReSource  product.  Net income for the second  quarter and year to date 2000
was favorably  impacted by reduced claim  frequency and the  absorption of fixed
costs on higher net earned premiums.

Global Special Risks net earned premiums for the second quarter and year to date
declined $4.2 million and $15.5 million from the comparable  periods in 1999 due
primarily to the impact of changes in the IRI  agreements.  Global Special Risks
net income for the second  quarter and year to date compared to the same periods
in 1999 was negatively  impacted by increased loss severity at EIL as well as in
our domestic special risk business. Global Special Risks may continue to have an
adverse  impact on  underwriting  results  until  such  time as  needed  pricing
improvements  are  accepted  in  the  marketplace.   The  Company  is  currently
evaluating various strategies regarding this business.

                                       15
<PAGE>

Engineering Services Operations
-------------------------------
                                    Quarter Ended         Six Months Ended
                                       June 30,               June 30,
                                    -------------         ----------------
                                   2000       1999          2000        1999
                                 -------   --------      ---------   ---------

Engineering services revenues    $ 40.2     $ 27.8       $   77.2    $   55.4
Engineering services expenses      37.6       25.6           71.6        50.8
                                  ------    ---------    --------     --------
Operating gain                   $  2.6     $  2.2       $    5.6    $    4.6
                                =========    ========    ========    =========
Net margin                          6.6%       8.2%           7.3%        8.3%


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),
Structural Integrity Associates, Inc. (Structural) and the Company's interest in
Integrated Process Technologies, LLC (IPT).

Engineering  services  revenues  for the second  quarter and first six months of
2000 increased $12.4 and $21.8 million compared to the same periods in 1999. The
growth in Engineering  services revenues for the second quarter and year to date
was largely due to growth in license and service  fees which  resulted  from the
Company's  agreement  with Enron  Energy  Services to provide  energy  services,
project management and other technical  assistance.  Engineering  revenue growth
also  reflected  increased  revenue  generated by  Structural  (acquired in July
1999),  HSBRT,  the start up operations of IPT and new agreements  with IRI that
became effective January 1, 2000.

Engineering  services  operating  margin was 6.6 and 7.3  percent for the second
quarter  and first six  months of 2000,  respectively,  compared  to 8.2 and 8.3
percent for  comparable  periods in 1999.  The  engineering  services  operating
margins continue to reflect  increased  investment of operating funds to develop
new  products  and  establish  start up  operations,  including  IPT which had a
negative impact on the operating  margin for the second quarter and year to date
2000.  While the Company is exploring  various  strategic  alternatives to limit
IPT's negative  impact,  there can be no assurance that such  strategies will be
implemented  in the near term.  Therefore,  IPT may  continue to have an adverse
impact on  engineering  services  operating  margins  during 2000 as the Company
continues to evaluate and develop this business.

                                       16
<PAGE>




Investment Operations
---------------------
                                  Quarter Ended             Six Months Ended
                                     June 30,                   June 30,
                                  -------------             ----------------
                                2000          1999          2000          1999
                             ---------     ---------      --------    ---------

Net investment income        $    15.6     $    16.6      $   30.5    $    32.3
Realized investment gains         10.2          10.2          23.5         17.3
                             ---------     ---------      --------    ---------
Pretax income from
  investment operations      $    25.8     $    26.8      $   54.0    $    49.6
                             =========     =========      ========    =========


Income from investment  operations decreased $1.0 million for the second quarter
and increased $4.4 million for the first six months of 2000 compared to the same
periods in 1999.  The decrease in net  investment  income for the second quarter
and year to date  2000,  primarily  related to reduced  investable  funds  which
resulted  from  the  repositioning  of our  investment  portfolio  in the  first
quarter,  a portion of the proceeds of which were used to  repurchase  stock and
repayment  of long  term  debt.  The  year to date  2000  increase  in  realized
investment gains reflected the shift of some investments out of common stocks in
accordance with the investment  portfolio's asset allocation  targets.  Realized
investment  gains for the second quarter and year to date 2000 also include $2.8
and  $5.4  million,  respectively,  of  losses  arising  from  declines  in  the
realizable value of certain venture capital  investments  considered to be other
than temporary.  The Company  continues to evaluate its investments for exposure
to declines in  realizable  value  considered  to be other than  temporary.  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.

Market Risk
-----------

The value of the  Company's  financial  instruments  reacts to  changes in macro
economic variables.  Market risk generally  encompasses  systemic risks or risks
associated with macro factors  relating to the economic impact of changes in the
fair value of a financial instrument.  Market risk relates to the variability of
market  prices  and/or cash flows  associated  with  changes in interest  rates,
securities prices,  market indices,  yield curves or currency exchange rates and
is inherent to all  financial  instruments.  The Company's  investment  strategy
continues to be to maximize  total return on the  investment  portfolio  through
investment  income  and  capital  appreciation  and is based on such  factors as
operational results, tax implications,  regulatory requirements, interest rates,
dividends to  stockholders,  servicing  requirements  of capital  securities and
market conditions.

The focus of this  disclosure is on one element of market risk - price risk. For
the  Company,  price risk relates to changes in the level of prices of financial
instruments due to changes in interest rates,  equity prices or foreign exchange
rates.  The primary price risk exposures of the Company relate to interest rates
and equity price risk.

For  purposes  of  this  disclosure   market  risk  sensitive   instruments  are
categorized as  instruments  entered into for trading  purposes and  instruments
entered  into for  purposes  other than  trading.  The Company does not hold any
financial  instruments entered into for trading purposes and, therefore,  market
risk  sensitive  instruments  are  classified  as held for  purposes  other than
trading.

                                       17
<PAGE>

Interest Rate Risk
------------------

Interest  rate risk is the major price risk facing the  Company's  fixed  income
portfolio and relates to the effect of changes in the level of interest rates on
the return on financial instruments.  The Company attempts to mitigate this risk
by investing in high quality issues of various  maturities  using a buy and hold
approach and by  structuring  its  portfolio  such that the impact on regulatory
capital is moderated.

Equity Market Risk
------------------

Equity market risk is the  possibility  that market  influences  will  adversely
affect the  expected  returns on equity  investments.  The  Company  attempts to
reduce this risk through  diversification  and focus on high quality,  blue chip
investments.

Foreign Exchange Risk
---------------------

Foreign  currency  risk is the chance  that  fluctuations  in  foreign  currency
exchange rates will impact the value of financial  instruments.  The Company has
foreign exchange exposure when it buys or sells foreign  currencies or financial
instruments   denominated  in  a  foreign   currency.   The  Company's   foreign
transactions are primarily denominated in Canadian dollars.

Sensitivity Analysis
--------------------

The  sensitivity  analysis  assumes an  instantaneous  shift in market  interest
rates,  with scenarios of interest  rates  increasing and decreasing 100 and 150
basis points from their levels at June 30, 2000,  with all other  variables held
constant.  The analysis  assumes the yield to worst  methodology.  A 100 and 150
basis point  increase  in the market  interest  rates would  result in a pre-tax
decrease in the net  financial  instrument  position of $47.2 million and $67.4,
respectively.  Similarly,  a 100 and 150 basis point decrease in market interest
rates  would  result  in a  pre-tax  increase  in the net  financial  instrument
position of $47.2 and $67.4 million, respectively.

Portfolio  sensitivity  to these  variables  tends to  change  over  time due to
changes in  portfolio  composition  and changes in market  environment.  For the
fixed maturity portfolio, sensitivity, as measured by duration, was 8.10 at June
30, 2000, essentially the same as at December 31, 1999.

The Company's  convertible capital securities were issued at fixed rates, and as
such, interest expense would not be impacted by interest rate shifts. The effect
of 100 and 150 basis  point  increases  in  interest  rates on the $300  million
convertible  capital  securities  would result in an  estimated  market value of
$252.3 million and $ 241.2  million,  respectively.  This is calculated  without
giving any effect to the  relationship  of the  conversion  price to the current
market price of HSB Group,  Inc.  common stock.  The impact of 100 and 150 basis
point increases in interest rates on the variable rate capital  securities would
result in an additional  annualized charge to pre-tax income of $1.1 million and
$ 1.6  million,  respectively.  A 100 and 150 basis  point  decrease in interest
rates  would  increase  annualized  pre-tax  income  by $1.1  million  and $ 1.6
million, respectively, per year.

Equity  price risk was  measured  assuming  an  instantaneous  10 percent and 25
percent  change  in the S&P 500 Index  from its level at June 30,  2000 with all
other  variables  held constant.  The Company's  equity  holdings  (comprised of
common  stocks and  non-redeemable  preferreds)  were  assumed to be 100 percent
correlated  to this index.  A 10 percent and 25 percent  increase or decrease in
the S&P 500  Index  would  result  in a $19.2  and  $48.0  million  increase  or
decrease,  respectively, in the net financial instrument position. The Company's
equity instruments'  sensitivity to equity market risk, as measured by portfolio
beta,  decreased  from 0.98 at December 31, 1999 to 0.94 at June 30, 2000.  This
change is generally attributed to portfolio repositioning during the period.

                                       18
<PAGE>

The sensitivity analysis also assumes an instantaneous 10 percent and 20 percent
change in the foreign currency  exchange rates versus the U.S. dollar from their
levels at June 30, 2000,  with all other  variables held constant.  A 10 percent
and 20 percent  strengthening  of the U.S.  dollar  would result in decreases of
$5.1 and $10.2 million,  respectively, in the net financial instrument position.
Weakening of the U.S.  dollar versus all other  currencies  would result in like
increases in the net financial instrument position.


The following  table  reflects the estimated  effects on the market value of the
Company's  financial  instruments  due to an increase  in interest  rates of 100
basis  points,  a 10  percent  decline  in the S&P 500 Index and a decline of 10
percent in foreign currency exchange rates.


Held For Other Than Trading Purposes

                                Market     Interest     Currency      Equity
At June 30, 2000                Value      Rate Risk       Risk        Risk
------------------------------------------------------------------------------

Fixed maturity securities      $  471.8    $ (33.4)    $  (3.5)    $    -
Equity securities                 384.4      (13.5)       (1.0)       (19.2)
Short term investments             40.9       (0.3)       (0.6)         -
                             -------------------------------------------------
     Total all securities      $  897.1    $ (47.2)    $  (5.1)    $  (19.2)
                             -------------------------------------------------

The following  table  reflects the estimated  effects on the market value of the
Company's  financial  instruments  due to an increase  in interest  rates of 150
basis points,  a 20 percent decline in foreign  currency  exchange rates,  and a
decline of 25 percent in the S& P 500 Index.

Held For Other Than Trading Purposes

                                Market     Interest     Currency      Equity
At June 30, 2000                Value      Rate Risk       Risk        Risk
------------------------------------------------------------------------------

Fixed maturity securities      $  471.8    $ (47.9)    $  (6.9)    $    -
Equity securities                 384.4      (19.0)       (2.1)      (48.0)
Short term investments             40.9       (0.5)       (1.2)         -
                             -------------------------------------------------
     Total all securities      $  897.1    $ (67.4)    $ (10.2)    $ (48.0)
                             -------------------------------------------------

Statement of Comprehensive Income

In  addition  to the impact of HSB's  results of  operations,  the  Consolidated
Statements of  Comprehensive  Income  display the effects of price  movements on
HSB's invested assets. As a result of market  fluctuations,  cumulative  holding
gains,  net of taxes, for the first six months of 2000 decreased $1.3 million as
compared to the decrease of $18.6 million in the same period in 1999.  Exclusive
of realized  gains,  the change in 2000 when compared to the first six months of
1999 is mainly due to rising interest rates.

                                       19
<PAGE>


Liquidity and Capital Resources

                                                          Balances at
                                                    ------------------------
                                                    June 30,     December 31,
                                                      2000           1999
                                                  ----------     ------------

Total assets                                       $ 1,953.2       $ 2,263.2
Short-term investments                                  40.9            53.5
Cash and cash equivalents                               66.3            73.0
Short-term borrowings                                   30.8            41.5
Long-term borrowings                                     -              25.1
Capital securities of subsidiary Trust I               107.0           109.0
Capital securities of subsidiary Trust II              300.0           300.0
Common shareholder's equity                            382.3           376.5


Liquidity refers to the Company's  ability to generate  sufficient funds to meet
the cash  requirements of its business  operations.  HSB Group,  Inc. (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 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 $39.0 million in the first six months of 2000
compared  to  $10.2  million  for the same  period  in 1999.  The  decreases  in
reinsurance assets,  insurance premiums  receivable,  prepaid acquisition costs,
unearned  insurance  premiums  and  claims  and  adjustments   expenses  on  the
Consolidated  Statement  of  Position  from  December  31, 1999 to June 30, 2000
largely relate to changes in the IRI arrangement, which became effective January
1, 2000.  This trend is expected to continue during 2000. Cash used in financing
activities  was $87.1  million in the first six months of 2000  compared to $5.1
million  for the same  period  in 1999.  This  increase  is  largely  due to the
decrease in short-term  borrowings and the settlement of $25.1 million of senior
notes that  matured  during the second  quarter of 2000.  Cash used in financing
activities  for the first six months of 2000 also includes the  repurchase of $2
million  in  face  amount  of  capital  securities  of  subsidiary  Trust I at a
discount.

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  increased  by
approximately  $5.8 million  since  December 31,  1999.  The increase  primarily
reflects  comprehensive  income of $38.2 million less dividends of $25.3 million
and stock  repurchases  of $9.6  million.  Shareholders'  equity as a percent of
assets was 19.6% up from 16.6% at  December  31,  1999 as changes in the balance
sheet  reflects the  Company's  decision to reduce its risk bearing  position in
Industrial Risk Insurers  effective January 1, 2000. During the first six months
of 2000, the Company repurchased approximately 365,000 shares of its outstanding
shares.

At June 30, 2000,  HSBIIC had  significant  short-term  and long-term  borrowing
capacity.  HSBIIC  is  currently  authorized  to  issue  up to $100  million  of
commercial paper, an increase of $25 million since December 31,

                                       20
<PAGE>

1999.  Commercial  paper  outstanding  at June 30,  2000 was  approximately  $27
million.  The  weighted-average  interest rate was 6.5 percent at June 30, 2000.
Standard & Poor's and Duff & Phelps credit rating  services have assigned  their
highest ratings for the commercial paper.

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 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.

                                       21
<PAGE>


PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

         See Note 4 to Consolidated Financial Statements, Part I, Item 1.

Item 4 - Submission of Matters to a Vote of Security Holders


(a) The Annual Meeting of Shareholders was held on April 18, 2000.


(b)  Three directors were nominated for election at the Annual Meeting.  Proxies
     for such meeting  were  solicited by  Registrant's  management  pursuant to
     Regulation  14A under the  Securities  Exchange  Act of 1934;  there was no
     solicitation in opposition to management's  nominees as listed in the proxy
     statement; and all of such nominees were elected for a three-year term.


(c) The following  matters were voted upon at the Annual Meeting with the voting
results indicated.


     1.   Election of directors

           Nominee             Votes for              Votes Withheld
           -------             ----------             --------------
           Ellis               24,241,373             363,061
           Ferland             24,260,314             344,120
           Fore                24,258,398             346,036


     2.   Appointment of PricewaterhouseCoopers L.L.P. as Independent
          Public Accountants

           Votes for               Against              Abstain
           ---------               -------              -------
           24,364,253              192,732              47,449


Item 6 - Exhibits and Reports on Form 8-K

(a)  Exhibits

     Exhibit 27 - Financial Data Schedule

(b)  Reports on Form 8-K

     Form 8-K dated April 18, 2000 reporting on the first quarter earnings,  the
     declaration of a dividend, and the Annual Meeting of Shareholders.

     Form 8-K dated June 16, 2000 reporting on the  unification of the Company's
     insurance  operations  under the newly  appointed  Chief  Global  Insurance
     Officer.


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<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:    August 11, 2000                    By:      /s/  Saul L. Basch
                                                          Saul L. Basch
                                                          Senior Vice President,
                                                          Treasurer and Chief
                                                          Financial Officer


Date:    August 11, 2000                    By:      /s/  Robert C. Walker
                                                          Robert C. Walker
                                                          Senior Vice President
                                                          and General Counsel


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