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, 1998

                                       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, 1998: 19,417,647


<PAGE>
                                HSB GROUP, INC.

                                     INDEX

PART I   FINANCIAL INFORMATION                                  PAGE

       Consolidated Statements of Operations for the
       Quarters Ended March 31, 1998 and 1997 (unaudited)........3

       Statement of Comprehensive Income for the Quarters
       Ended March 31, 1998 and 1997 (unaudited).................4

       Consolidated Statements of Financial Position as
       of March 31, 1998 (unaudited) and December 31, 1997 ......5

       Consolidated Statements of Cash Flows for the
       Three Months Ended March 31, 1998 and 1997 (unaudited) ...6

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

       Management's Discussion and Analysis of
       Consolidated Financial Condition and Results
       of Operations.............................................11

PART II  OTHER INFORMATION

       Item 1 - Legal Proceedings................................18
       Item 6 - Exhibits and Reports on Form 8-K.................20

SIGNATURES.......................................................21

                                      -2-
<PAGE>

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

                                  (Unaudited)


                                                            Quarter
                                                         Ended March 31

                                                    1998           1997
                                                  ----------   ----------
  Revenues: 
    Insurance premiums                             $ 101.5      $ 122.3
    Engineering services                              17.6         14.7
    Net investment income                             15.2          8.0
    Realized investment gains                          3.2          0.5
                                                   ----------   ----------
     Total revenues                                  137.5        145.5
                                                   ----------   ----------
  Expenses:
    Claims and adjustment                             44.6         51.5
    Policy acquisition                                12.6         23.5
    Underwriting and inspection                       33.5         35.3
    Net engineering services                          16.1         13.6
    Interest                                           0.1          0.2
                                                   ----------   ----------
      Total expenses                                 106.9        124.1
                                                   ----------   ----------

Income from continuing operations before 
   income taxes and distributions on capital      
   securities                                      $  30.6      $  21.4

Gain on sale of IRI                                   39.0           -

Income taxes (benefit):
   Current                                            27.6          6.5
   Deferred                                           (5.1)        (1.0)
                                                   ----------   ----------
     Total income taxes                            $  22.5      $   5.5
                                                                    

Distribution on capital securities of 
   subsidiary trusts, net of  income 
   tax benefits of $2.5 and $ --.                      4.5           -

                                                   ----------   ----------
Income from continuing operations                  $  42.6      $  15.9
                                                                
Discontinued operations:
   Loss from operations, net of 
   income tax benefits of                             (6.6)          -
   $3.2 and $--.
                                                     
   Gain on disposal, net of income 
   taxes of $23.7 and $--.                            36.9           -
                                                   ----------   ----------
     Total discontinued operations                 $  30.3      $    -
                                                   ----------   ----------

     Net income                                    $  72.9      $  15.9
                                                                   
                                                   ==========   ==========

Per share data assuming stock split: 

Net income per common share - basic:

    Income from continuing operations              $   1.45      $  0.52        
    Net income                                     $   2.49      $  0.52        

Net income per common share - assuming dilution

    Income from continuing operations              $   1.31      $  0.52        
    Net income                                     $   2.17      $  0.52        

Dividends declared per common share                $   0.40      $  0.38        

Average common shares outstanding and common
   stock equivalents                                  35.2         30.7


See Notes to Consolidated Financial Statements.

                                             


                                      -3-
<PAGE>



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




                                                      Quarter Ended
                                                           March
                                                 1998              1997
                                             -----------        ----------
Net income                                   $   72.9             $   15.9
Other comprehensive income, net of tax:

   Unrealized gains on securities:
      Unrealized holding gains arising 
        during the period (net of taxes 
        of  9.6; 1.7)                            17.2                  1.9
      Add: reclassification adjustment 
        for losses included in net income         0.2                  0.2
                                             -----------        ----------
                                                 17.4                  2.1
   Foreign currency translation adjustments       0.3                 (0.3)
                                             -----------        ----------
Other comprehensive income                       17.7                  1.8

Comprehensive income                          $  90.6             $   17.7
                                            ============        ==========


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,
                                                    1998             1997
                                                 (Unaudited)
                                                --------------    -----------
Assets:
    Cash                                       $     20.4         $   45.3
    Short-term investments, at cost                 147.3            379.2
    Fixed maturities, at fair value
      (cost -$534.6; $241.1)                        538.5            248.4
    Equity securities, at fair value
      (cost - $318.2;  $231.3 )                     441.1            323.8
                                                  -----------     -----------
      Total cash and invested assets               1147.3            996.7

    Reinsurance assets                              307.1            124.5
    Insurance premiums receivable                   192.7            138
    Engineering services receivable                  14.4             12.2
    Fixed assets                                     37.5             36.4
    Prepaid acquisition costs                        55.5             45.5
    Capital lease                                    15.1             15.3
    Investment in Radian                               -              83.4
    Other assets                                    101.9             88.2
                                                 -----------       ----------
        Total assets                           $   1871.5         $ 1540.2
                                                 ===========       ==========

Liabilities:
    Unearned insurance premiums                $    467.6         $  290.3
    Claims and adjustment expenses                  296.7            276.7
    Short-term borrowings                             0.9             42.4
    Long-term borrowings                             25.1             25.1
    Capital lease                                    27.9             27.9
    Deferred income taxes                            36.1             31.5
    Accrued dividends and distributions 
       on capital securities                         17.6             13.3
    Other liabilities                               179.4             78.8
                                                 -----------       ----------
        Total liabilities                          1051.3            786.0
                                                 -----------       ----------

Convertible redeemable preferred 
    stock- Series B (stated and 
    redemption value; shares authorized,
    zero issued and outstanding)                      0.0              0.0

Company obligated mandatorily  redeemable 
    capital securities of subsidiary Trust
    I holding solely junior  subordinated  
    deferrable interest debentures of the
    Company, net of unamortized discount of 
    $1.1 and $1.1 million, respectively             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 21.3; 
    shares outstanding 19.4; 19.6)                   10.0             10.0
    Additional paid-in capital                       32.2             31.6
    Unrealized investment gains, net of tax          77.5             59.8
    Retained earnings                               298.3            248.8
    Benefit plans                                    -6.7             -4.9
                                                 -----------       -----------
          Total shareholders' equity                411.3            345.3
                                                 -----------       -----------
          Total                                $   1871.5         $ 1540.2
                                                 ===========       ===========

      Shareholders' equity per common share    $     14.12        $   11.75

See Notes to Consolidated Financial Statements.



                                      -5-
<PAGE>




                            HSB Group, Inc.
                 Consolidated Statements of Cash Flows
                             (in millions)
                              (Unaudited)
                                                      Quarter Ended
                                                        March 31,
                                                   ---------------------
                                                       1998          1997
                                                     ---------     --------
Operating activities:
Net income                                          $   72.9      $  15.9
Adjustments to reconcile net income to 
    net cash provided by operating activities:
    Depreciation and amortization                        2.4          1.9
    Deferred income taxes (benefit)                     (5.1)        (1.0)
    Realized investment gains                           (3.2)        (0.5)
    Realized gain from the disposition of
       Radian (after tax)                              (30.3)         --
    Realized gain from the disposition of 
       IRI (after tax)                                 (25.2)         --
    Change in:
       Reinsurance assets                             (182.6)        26.4
       Insurance premiums receivable                   (54.7)        (2.2)
       Engineering services receivable                  (2.2)         0.4
       Prepaid acquisition costs                       (10.1)        (3.3)
       Unearned insurance premiums                     177.3         11.7
       Claims and adjustment expenses                   20.0        (16.8)
       Investment in Radian                              --          (0.8)
       Other                                            56.2         (2.3)
                                                       ------        -----

     Cash provided by operating activities              15.4         29.4
                                                       ------        -----

Investing activities:
Fixed asset additions, net                              (3.3)        (1.3)

Investments:
    Sale of short-term investments, net                231.9          6.6
    Purchase of fixed maturities                      (307.1)       (25.8)
    Proceeds from the disposition of Radian            128.9          --
    Proceeds from the disposition of IRI                49.1          --
    Proceeds from sale of fixed maturities              11.6          2.1
    Redemption of fixed maturities                       2.3          1.5
    Purchase of equity securities                     (132.0)       (33.1)
    Proceeds from sale of equity securities             47.3         37.4
                                                      ------        -----

     Cash provided by (used in) investment activities   28.7        (12.6)
                                                      ------        -----

Financing Activities:
Increase (decrease) in short-term borrowings           (14.4)       (11.7)
Reacquisition of stock                                 (19.7)         --
Exercise of stock options                                6.6          0.1
                                                       ------       -----

          Cash used in financing activities            (69.0)        (8.7)
                                                       ------       -----
 
    Net increase (decrease) in cash                    (24.9)         8.1

    Cash at beginning of period                         45.3          4.5
                                                       ------       -----

    Cash at end of period                           $   20.4      $  12.6
                                                     ========     =======

Interest paid                                       $    0.1      $   0.3
                                                     --------     -------

Federal income tax paid                             $    0.8      $   3.8
                                                       ------     -------


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 1997  Annual  Report.
         Certain  amounts for 1997 have been  reclassified  to conform  with the
         1998 presentation.

2.       Discontinued Operations

         On January  2, 1998,  the  Company  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, the Company contributed substantially all of the assets of its
         wholly-owned subsidiary,  Radian Corporation to Radian LLC. The results
         of Radian LLC were  classified  as  discontinued  operations  following
         ratification  in July 1997 by the 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 until the closing of the sale on January
         2, 1998. The after-tax gain of $30.3 million  recognized in 1998 is net
         of deferred  losses  noted above.  In 1996 and prior to July 1997,  the
         Company's share of the joint venture's  results were recorded as equity
         in Radian.

3.       Industrial Risk Insurers

         On January 6, 1998, The Hartford Steam Boiler  Inspection and Insurance
         Company  (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  $39.0
         million  pre-tax  and  $25.2  million  after-tax.  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. Contemporaneous with the close of the sale,
         IRI was  reconstituted  with ERC (with a 99.5 percent share) and HSBIIC
         (with a .5 percent share) as the sole members.  The new association has
         been 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 reinsurance agreements with ERC and HSB Industrial Risk
         Insurers,  HSBIIC transferred its manufacturing book of business to HSB
         Industrial Risk Insurers and will retain 85% of the equipment breakdown
         insurance and 15% of the property  insurance of the combined  insurance
         portfolio.



                                      -7-
<PAGE>



4.       Recent Accounting Developments

         In June 1997 the  Financial  Accounting  Standards  Board (FASB) issued
         Statement of Financial  Accounting Standards (SFAS) No. 130 " Reporting
         Comprehensive Income" which requires items that comprise  comprehensive
         income be  reported  in a  financial  statement  display  with the same
         prominence  as  other  financial  statements.  This  presentation  will
         include such items as market value  adjustments of securities,  foreign
         currency  translation,  and certain adjustments made for benefit plans,
         which  are   currently   reported  as  components  of  the  changes  in
         shareholders'  equity.  This  statement is effective  beginning in 1998
         with retroactive restatement of prior periods required.

         Also in June of 1997 the FASB  issued SFAS No. 131  "Disclosures  about
         Segments of an  Enterprise  and  Related  Information".  This  standard
         requires  companies to report  financial  and  descriptive  information
         about   reportable   operating   segments.   It   includes   disclosure
         requirements  relating to products and services,  geographic  areas and
         major  customers.  This statement will be effective  beginning year end
         1998.

5.       Legal Proceedings

         HSBIIC  is  involved  in  two  arbitration  or  litigation  proceedings
         regarding  the extent to which  certain  explosion  events are  insured
         under  boiler and  machinery  policies of HSBIIC or under the  all-risk
         property  insurance  policies  issued  by other  companies.  Management
         believes HSBIIC's policies do not provide coverage for losses resulting
         from the explosion events that are the subject of these proceedings.

         HSBIIC  has  accrued  $6.5  million  with  respect  to these  cases for
         potential LAE, including legal costs to defend HSBIIC's  position.  One
         case is in the  process  of  pre-trial  summary  judgment  motions  and
         appeals;  the other case is involved in both arbitration and litigation
         proceedings.  A trial  date has not been set for  either  case.  In the
         event  that  HSBIIC  is held  liable  for one or both of the  remaining
         claims,  amounts in excess of HSBIIC's net maximum aggregate  retention
         of  $8.5  million  is  recoverable  from   reinsurers.   Claim  amounts
         potentially  recoverable  from  reinsurers  in the event of a  possible
         adverse outcome in these cases could range, in the aggregate,  from $40
         million to $195 million.

         The obligations of HSBIIC's  reinsurers with respect to these cases are
         not  in  dispute.  Therefore,  management  believes  that  any  adverse
         outcomes  in these cases will not,  in the  aggregate,  have a material
         effect on either the results of  operations  or financial  condition of
         the Company.  HSBIIC's  reinsurance  contracts do not require HSBIIC to
         reimburse its  reinsurers  for any losses such  reinsurers  might incur
         should  these  cases not be decided in  HSBIIC's  favor.  Nevertheless,
         reinsurers  often quote rates for future  coverages based upon their or
         other reinsurers' experience on a particular account. Therefore, in the
         event  HSBIIC's   reinsurers  pay  significant  sums  pursuant  to  the
         arbitration or litigation  proceedings  described  above,  it is likely
         HSBIIC's  reinsurance rates would increase in future periods.  However,
         given  the  insured   capacity  that  exists  in  reinsurance   markets
         worldwide,  coupled  with  HSBIIC's  ability to negotiate a redesign or
         restructuring of its reinsurance  program, it does not necessarily mean
         that such an increase would be material.




                                      -8-
<PAGE>



         HSBIIC was involved in a third proceeding  regarding  coverage for loss
         regarding  an explosion  event.  A lower court ruling in that case held
         that an explosion did occur,  and that HSBIIC was not liable for losses
         of the insured resulting from the explosion.  In a further action,  the
         court denied  HSBIIC's  motion for summary  judgment on certain issues,
         thus leaving HSBIIC potentially  liable for certain  unqualified losses
         resulting from events prior to the  explosion.  In the first quarter of
         1997, HSBIIC and the property insurer jointly settled the case with the
         insured. A final allocation of the loss in this case was reached in the
         decision of a mediator  dated  February 2, 1998.  The  decision  had no
         material effect on HSB earnings.

         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 a material  adverse impact on the results of
         operations or the financial position of the Company.

6.       Earnings per share

         In February 1997, FASB issued SFAS No. 128, "Earnings per Share".  This
         statement  established  standards for computing and presenting earnings
         per share  (EPS).  It replaced the  presentation  of primary EPS with a
         presentation of basic EPS. It also requires dual  presentation of basic
         and   diluted  EPS  on  the  face  of  the  income   statement   and  a
         reconciliation  of the  numerator  and  denominator  of the  basic  EPS
         computation  to  the  numerator  and  denominator  of the  diluted  EPS
         computation.  The  requirements of this statement  became effective for
         year end 1997 financial  statements  with prior  restatement  required.
         Accordingly,  comparative  information  presented  in the  Consolidated
         Statements of Operation have been restated in compliance  with SFAS No.
         128.  Previously,  the company reported EPS of $ 0.78 per share for the
         period ended March 31, 1997.

         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 will be distributed on or about May 22, 1998.
         In accordance  with SFAS No. 128, all earnings per share  presentations
         have been adjusted to reflect the impact of the stock split,  including
         retroactive restatement of prior periods.

         Earnings per share on a pre-split basis are as follows:

                                                          Quarter Ended
                                                            March 31,
                                                      1998            1997
                                                      ----            ----
            Net income per share-basic               $3.73            $0.78
            Net income per share-assuming dilution   $3.26            $0.78


                                      -9-
<PAGE>



<TABLE>

         Computation of Earnings Per Share:
         (shares adjusted to reflect stock split)
                                                          Quarter Ended
                                                          March 31, 1998

                                              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>

<TABLE>

                                                       Quarter Ended
                                                      March 31, 1997

                                              Income           Shares              Per
                                                                                  Share
     <S>                                      <C>              <C>               <C>
     Net income                               $15.9
     Less: convertible preferred
        stock dividends                         0.4

     Basic EPS:
     Income available to 
        common shareholders                   $15.5(A)

    Weighted Average Common
        Shares  Outstanding                                     30.1(B) 
    Net  income  per  common
        share-basic:                                                             $0.52(A/B)*


    Effect of dilutive securities:
        Preferred stock dividends               0.4
        Convertible preferred stock                              0.6
        Stock options                                             -
    Diluted EPS:
    Income available to common
        and assumed conversions:              $15.9(C)          30.7(D)

    Net income per common share-assuming dilution:                               $0.52 (C/D)

</TABLE>
      * Computation excludes rounding.

                                      -10-
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS
                       OF CONSOLIDATED FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                 MARCH 31, 1998


RESULTS OF OPERATIONS
 (dollar amounts in millions)
Consolidated Overview
                                                          Quarter Ended
                                                             March 31

                                                       1998              1997
                                                       ----              ----

Gross Earned Premium                                 $  181.7         $   155.7

Ceded Premium                                            80.2              33.4
                                                     --------         ---------

Insurance premium                                    $  101.5         $   122.3

Net engineering services revenue                         17.6              14.7

Net investment income                                    15.2               8.0

Realized investment gains                                 3.2               0.5
                                                     --------         ---------

    Total revenues                                   $  137.5         $   145.5
                                                     ========         =========

Pre-tax Income from Continuing Operations:

  Pre-tax income excluding sale of IRI               $   30.6         $    21.4

  Pre-tax Gain on Sale of IRI                        $   39.0              --
                                                     --------         ---------

  Pre-tax income                                     $   69.6         $    21.4

Income taxes on Continuing Operations                $   22.5         $     5.5

Distributions on Capital Securities                  $    4.5              --
                                                     ---------        ---------

Income From Continuing Operations                    $   42.6         $    15.9

After-tax Gain on Radian Disposal                    $   30.3              --
                                                     --------         ---------

Net income                                           $   72.9         $    15.9
                                                     ========         =========

Net income per common share:

  Basic                                              $   2.49         $     .52
  Diluted                                            $   2.17         $     .52

Net income for the first quarter of 1998 included after-tax gains on the sale of
HSB's  interests in Industrial  Risk Insurers (IRI) of $ 25.2 million and Radian
International LLC of $ 30.3 million. The Radian International 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.  As a result,  HSB's interest in Radian  International LLC
was classified as a discontinued operation.  Absent these sales, HSB's after-tax
earnings  increased  9.9 percent from the first  quarter of 1997 due to improved
engineering margins and higher realized gains.

                                      -11-
<PAGE>

Gross earned  premiums  grew 16.7% percent  compared to the prior year.  Much of
this growth is  attributable  to HSB Industrial  Risk Insurers.  Contemporaneous
with the sale of IRI,  the IRI  association  was  reconstituted  with  Employers
Reinsurance Corporation (ERC) (with a 99.5 percent share) and The Hartford Steam
Boiler  Inspection and Insurance  Company  (HSBIIC) (with a .5 percent share) as
sole members. The new association has been renamed HSB Industrial Risk Insurers.
HSBIIC writes the business for HSB Industrial  Risk Insurers using its insurance
licenses and provides  certain other  services.  HSBIIC  transferred  its highly
protected  risk (HPR)  manufacturing  book of  business to HSB  Industrial  Risk
Insurers and through  various  reinsurance  arrangements  with ERC,  HSBIIC will
retain 85  percent of the  equipment  breakdown  business  and 15 percent of the
property business of the combined insurance  portfolio.  This arrangement is the
largest  contributing  factor in the growth of both the gross earned premium and
the ceded  premium.  As a result,  both the Unearned  insurance  premium and the
Reinsurance  assets  reflected  in  the  Consolidated  Statements  of  Financial
Position have increased significantly. The first quarter combined ratio improved
to 89.0  percent in 1998 from 90.0  percent in 1997.  Net  engineering  services
revenue  increased  19.7  percent  for the first  quarter  and  margins  in this
business grew to 8.4 percent from 7.1 percent in the first quarter of 1997.

The  effective  tax rate on  income  from  continuing  operations  for the first
quarter was 32 percent  compared to 26 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

 In June of 1997 the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information".  This standard requires companies to report
financial and descriptive  information about reportable  operating segments.  It
includes disclosure  requirements relating to products and services,  geographic
areas and major  customers.  This statement will be effective with calendar year
1998,  however  application is not required for interim financial  statements in
the initial  year.  It is possible  that this  standard may redefine our segment
information.  However,  the Company has not yet determined how SFAS No. 131 will
be applied.


                                      -12-
<PAGE>

Insurance Operations

Insurance  operations include the insurance results of The Hartford Steam Boiler
Inspection and Insurance Company;  HSB Engineering  Insurance Limited (HSB-EIL);
The Boiler  Inspection  and  Insurance  Company  of Canada  (BI&I) and The Allen
Insurance Company, Ltd.



                                                      Quarter Ended
                                                        March 31


                                                1998             1997
                                                ----             ----

Gross earned premium                        $   181.7         $   155.7





Ceded premium                                    80.2              33.4
                                            ---------         ---------

Insurance premium                               101.5             122.3

Claims and adjustment expenses                   44.6              51.5

Underwriting, acquisition

     and other expenses                          46.1              58.8
                                            ---------         ---------

Underwriting gain                           $    10.8         $    12.0
                                            =========         =========




Loss ratio                                      43.9%             42.1%
Expense ratio                                   45.1%             47.9%
                                                -----             -----

Combined ratio                                  89.0%             90.0%
                                                =====             =====


Gross  earned  premiums in the first  quarter  increased  16.7  percent from the
comparable  period in 1997. This increase was primarily  attributable to the new
arrangement  with HSB Industrial  Risk Insurers.  Gross earned premiums from IRI
increased $24.6 million in 1998 compared to the comparable period in 1997. Gross
earned premiums  representing  coverage  outside the U.S. for non HSB Industrial
Risk  Insurers  business  increased  5  percent  in the first  quarter  from the
comparable  period in 1997. In certain areas of our direct  domestic and foreign
business,  the market is experiencing price erosion. HSB will not write business
at rates which would lessen our ability to maintain underwriting profit.

                                      -13-
<PAGE>

Increases in ceded premium of 140 percent in the current quarter were the result
of both the new HSB Industrial Risk Insurers  arrangement  previously  discussed
and  related  reinsurance  with ERC,  and changes in 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  will continue to result in high growth in
gross earned premium but lower growth in net earned premium.

The loss ratio  increased from 42.1 percent in the first quarter of 1997 to 43.9
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.  In the first quarter of 1997 flood related
losses  impacted  the loss  ratio by 1.2  percentage  points.  Gross  claims and
adjustment  expenses for the first  quarter 1998 and 1997 were $89.4 million and
$74.9 million, respectively.

The expense  ratio  improved to 45.1% in the first quarter of 1998 from 47.9% in
the first quarter of 1997.  The new quota share  reinsurance  agreements and the
HSB  Industrial  Risk  Insurers  arrangement  with ERC,  both of which result in
ceding  commissions  to HSBIIC have  positively  impacted  our expense  ratio by
approximately  8  percentage  points.   Ceding  commission  should  continue  to
positively  impact the expense ratio  throughout  1998. A portion of such ceding
commission is intended to reimburse HSB for the additional costs of managing HSB
Industrial Risk Insurers.


Engineering Services Operations

                                                           Quarter Ended
                                                              March 31

                                                       1998              1997
                                                       ----              ----

Net engineering services revenue                     $   17.6          $  14.7
Net engineering services expenses                        16.1             13.6
                                                     --------          -------

Operating gain                                       $    1.5          $   1.1
                                                     ========          =======

Net margin                                                8.4%             7.1%

                                      -14-
<PAGE>

Engineering  services  operations  include  the  results  of  HSB's  and  BI&I's
engineering  services,  HSB Reliability  Technologies  (HSBRT) and the Company's
other engineering services subsidiaries.

Net engineering  services  revenues  increased $2.9 million in the first quarter
compared to the same period in 1997. The growth in revenues was primarily due to
increases  generated by HSBRT as their revenues increased 17.7 percent,  as well
as revenues  generated by some recent small  acquisitions which were made in the
latter part of 1997. The improvement in operating gain from the previous periods
reflects efforts to improve staff  utilization and a refocus in certain areas on
pricing  strategies.  We are still incurring costs to develop new products which
have the objective of increasing growth rates.

The Company has been focusing on identifying acquisition candidates in the niche
engineering  management  consulting  service  business,   primarily  in  process
industries, in order to grow the engineering service segment of the business. On
May 1, 1998 HSB and Solomon  Associates,  Inc. (SAI)  announced an agreement for
HSB to acquire SAI.  SAI provides  comparative  performance  benchmarking  to 80
percent of the worldwide  petroleum refining industry and had gross sales of $13
million in 1997.  The company also serves  petro-chemical  and power  generation
customers and conducts performance  improvement  consulting,  business valuation
assessments, performance monitoring and maintenance database services.

Investment Operations

                                  Quarter Ended
                                    March 31

                                         1998             1997

Net investment income               $     15.2        $      8.0
Realized investment gains                  3.2               0.5
                                     ---------         ---------

Pretax income from
investment operations               $     18.4        $      8.5
                                    ==========        ==========

Net investment income for the first quarter increased  significantly compared to
the  first  quarter  of 1997 due to the  investment  of  proceeds  from  capital
securities issued during the second half of 1997. In addition, proceeds from the
January  sales  of  HSB's  interests  in  IRI  and  Radian   International   LLC
significantly increased investable funds. Realized investment gains were largely
driven in 1998 by call  premiums on fixed income  investments.  In 1997 realized
gains were reduced by $1.4 million to reflect the estimated  fair value of three
"zero cost" collar contracts  entered into at the end of 1996 which were used to
mitigate the effects of market risk on the U.S.
common stock portfolio.

                                      -15-
<PAGE>

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.


Liquidity and Capital Resources

                                                  Balances at
                                       March 31              December 31
                                        1998                     1997
                                     ------------          -------------

Total assets                          $   1,871.5             $   1,540.2
Short-term investments                      147.3                   379.2
Cash                                         20.4                    45.3
All other invested assets                   979.6                   572.2
Short-term borrowing                           .9                    42.4
Common shareholder's equity                 411.3                   345.3

Liquidity refers to the Company's  ability to generate  sufficient funds to meet
the cash requirements of its business operations. The Company receives a regular
inflow of cash from maturing  investments and engineering services and insurance
operations.  The mix of the  investment  portfolio  is  managed  to  respond  to
expected claim pay-out  patterns and other cash  requirements.  The Company 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 certain  capital
securities.

Cash  provided from  operations  was $ 15.4 million in the first three months of
1998  compared to $29.4  million for the same period in 1997.  The  reduction is
primarily the result of the timing of settlement of portfolio  transfers related
to IRI in the first  quarter of 1998 as compared  to the first  quarter of 1997.
Aside from IRI activity,  premiums  collected were  essentially flat compared to
the first quarter of 1997 while claims paid declined  approximately  36 percent.
Net settlements with reinsurers declined 41 percent in the same time period.

                                      -16-
<PAGE>

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 and investment  activities.  Common  shareholders'
equity of $411.3  million at March 31, 1998  increased  by $66.0  million  since
December 31, 1997. The increase  primarily  reflects net income of $72.9 million
for the  quarter  and an  increase  in  unrealized  gains,  net of tax, of $17.7
million,   offset  by  common  dividends  of  $11.7  million  and  common  stock
repurchases of $19.7 million.

At March  31,  1998,  the  Company  had  significant  short-term  and  long-term
borrowing  capacity.  The  Company is  currently  authorized  to issue up to $75
million of commercial paper.  Commercial paper outstanding at March 31, 1998 was
$.9 million

The Company is involved in two arbitration or litigation  proceedings  regarding
the extent to which  certain  explosion  events  are  insured  under  boiler and
machinery  policies  of the  Company or under the  all-risk  property  insurance
policies issued by other companies.  Management  believes the Company's policies
do not provide  coverage for losses resulting from the explosion events that are
the  subject of these  proceedings.  In the  opinion of  management  any adverse
outcomes in these cases will not, in the  aggregate,  have a material  effect on
either the results of  operations  or financial  condition of the Company.  More
information  pertaining to these legal  proceedings may be found under note 5 of
the Notes to Consolidated Financial Statements herein.

The Company continues to evaluate the potential  coverage  exposures arising out
of the  year  2000  and its  impact  on  insured  equipment.  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.
During the first  quarter the Company  filed with the various  jurisdictions  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.
Quantification of the Company's  exposure to year 2000 losses is not possible at
this time as  applicable  policy  wordings  have not been legally  tested in the
context of such losses.  See discussion on other year 2000  uncertainties in the
Management's  Discussion and Analysis of  Consolidated  Financial  Condition and
Results of Operations in the Company's 1997 Report on Form 10-K.


                                      -17-
<PAGE>

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; adverse development on losses and
loss  adjustment  expenses  related  to claims  arising  in prior  periods;  new
insurance and reinsurance  contract  interpretations,  including coverage issues
related to Year 2000  events;  changes in asset  valuations;  consolidation  and
restructuring  in the  financial  services  industry;  changes in the  Company's
participation in joint underwriting associations, and in particular IRI; 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.


                          PART II - OTHER INFORMATION

Item 1.  Legal Proceedings
--------------------------

          HSBIIC  is  involved  in two  arbitration  or  litigation  proceedings
          regarding  the extent to which  certain  explosion  events are insured
          under  boiler and  machinery  policies of HSBIIC or under the all-risk
          property  insurance  policies  issued by other  companies.  Management
          believes   HSBIIC's  policies  do  not  provide  coverage  for  losses
          resulting  from the  explosion  events  that are the  subject of these
          proceedings.

          HSBIIC has  accrued  $6.5  million  with  respect  to these  cases for
          potential LAE, including legal costs to defend HSBIIC's position.  One
          case is in the  process of  pre-trial  summary  judgment  motions  and
          appeals; the other case is involved in both arbitration and litigation
          proceedings.  A trial  date has not been set for either  case.  In the
          event  that  HSBIIC is held  liable  for one or both of the  remaining
          claims,  amounts in excess of HSBIIC's net maximum aggregate retention
          of  $8.5  million  is  recoverable  from  reinsurers.   Claim  amounts
          potentially  recoverable  from  reinsurers  in the event of a possible
          adverse outcome in these cases could range, in the aggregate, from $40
          million to $195 million.

                                      -18-
<PAGE>

          The obligations of HSBIIC's reinsurers with respect to these cases are
          not in  dispute.  Therefore,  management  believes  that  any  adverse
          outcomes in these cases will not,  in the  aggregate,  have a material
          effect on either the results of operations  or financial  condition of
          the Company.  HSBIIC's reinsurance  contracts do not require HSBIIC to
          reimburse its  reinsurers for any losses such  reinsurers  might incur
          should  these  cases not be decided in HSBIIC's  favor.  Nevertheless,
          reinsurers  often quote rates for future coverages based upon their or
          other reinsurers'  experience on a particular account.  Therefore,  in
          the event  HSBIIC's  reinsurers pay  significant  sums pursuant to the
          arbitration or litigation  proceedings  described  above, it is likely
          HSBIIC's reinsurance rates would increase in future periods.  However,
          given  the  insured  capacity  that  exists  in  reinsurance   markets
          worldwide,  coupled with  HSBIIC's  ability to negotiate a redesign or
          restructuring of its reinsurance program, it does not necessarily mean
          that such an increase would be material.

          HSBIIC was involved in a third proceeding  regarding coverage for loss
          regarding an explosion  event.  A lower court ruling in that case held
          that an explosion did occur, and that HSBIIC was not liable for losses
          of the insured resulting from the explosion.  In a further action, the
          court denied HSBIIC's  motion for summary  judgment on certain issues,
          thus leaving HSBIIC potentially liable for certain  unqualified losses
          resulting from events prior to the explosion.  In the first quarter of
          1997,  HSBIIC and the property  insurer  jointly settled the case with
          the insured.  A final  allocation of the loss in this case was reached
          in the decision of a mediator dated February 2, 1998. The decision had
          no material effect on HSB earnings.

          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 a material  adverse impact on the results of
          operations or the financial position of the Company.


                                      -19-
<PAGE>

Item 6 - Exhibits and Reports on Form 8-K

          (a)  Exhibits

               Exhibit  10(ii)  -  Operating   agreement  for  HSB-IRI  Property
               Insurance   Business   by   and   among   Employers   Reinsurance
               Corporation, HSB Industrial Risk Insurers L.L.C., Industrial Risk
               Insurers,  and The Hartford Steam Boiler Inspection and Insurance
               Company, effective as of January 1, 1998
                                     
               Exhibit 10(iii)(a) - HSB Group, Inc. Long-Term Incentive Plan, as
               amended and restated effective January 1, 1998

               Exhibit 10(iii)(b) - HSB Group, Inc.  Short-Term  Incentive Plan,
               as amended and restated effective January 1, 1998

               Exhibit  10(iii)(c)  - The HSB Group,  Inc.  Directors  Stock and
               Deferred  Compensation  Plan,  as amended and restated  effective
               January 1, 1998

               Exhibit (27.1) - Financial Data Schedule
               Exhibit (27.2) - Financial Data Schedule

          (b)  Reports on Form 8-K

               (i) Form 8-K dated January 12, 1998 to report sale of interest in
               Industrial Risk Insurers and $300 million of convertible  capital
               securities to Employers Reinsurance Corporation; and

               (ii) Form 8-K dated  January  28, 1998 to report  Fourth  Quarter
               1997 Results of Registrant



                                      -20-
<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 15, 1998               By:      /s/ Saul L. Basch
                                               Saul L. Basch
                                               Senior Vice President, Treasurer
                                               and Chief Financial Officer     
                                                             

Date:  May 15, 1998               By:      /s/ Robert C. Walker
                                               Robert C. Walker
                                               Senior Vice President and
                                               General Counsel

                                      -21-
<PAGE>


                               INDEX TO EXHIBITS

Exhibit No.         Description
----------          -----------       
   10(ii)      Operating   agreement  for  HSB-IRI  Property
               Insurance   Business   by   and   among   Employers   Reinsurance
               Corporation, HSB Industrial Risk Insurers L.L.C., Industrial Risk
               Insurers,  and The Hartford Steam Boiler Inspection and Insurance
               Company, effective as of January 1, 1998
                                     
   10(iii)(a)  HSB Group, Inc. Long-Term Incentive Plan, as
               amended and restated effective January 1, 1998

   10(iii)(b)  HSB Group, Inc.  Short-Term  Incentive Plan,
               as amended and restated effective January 1, 1998

   10(iii)(c)  The HSB Group,  Inc.  Directors  Stock and
               Deferred  Compensation  Plan,  as amended and restated  effective
               January 1, 1998

   27.1        Financial Data Schedule
   27.2        Financial Data Schedule