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, 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 April 30, 2000: 29,026,521.


<PAGE>


                                 HSB GROUP, INC.

                                      INDEX


PART I   FINANCIAL STATEMENTS                                          PAGE

      Item 1 - Financial Statements

      Consolidated Statements of Operations for the
       Quarters ended March 31, 2000 and 1999 (unaudited).............. 3

      Consolidated Statements of Comprehensive Income
       for the Quarters ended March 31, 2000 and 1999 (unaudited)...... 4

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

      Consolidated Statements of Cash Flows for the
       Quarters ended March 31, 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...10

PART II  OTHER INFORMATION

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

SIGNATURES.............................................................19


                                       2
<PAGE>





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

                                                                 Quarter
                                                              Ended March 31
                                                            2000          1999
                                                        ------------------------
Revenues:
  Gross earned premium                                   $ 182.1       $ 208.9
  Ceded premiums                                            90.8         112.4
                                                        ------------------------
  Insurance premiums                                        91.3          96.5
  Engineering services                                      37.0          27.6
  Net investment income                                     14.9          15.7
  Realized investment gains                                 13.3           7.1
                                                        ------------------------
     Total revenues                                        156.5         146.9
                                                        ------------------------
Expenses:
  Claims and adjustment                                     38.8          38.3
  Policy acquisition                                        19.8          22.6
  Underwriting and inspection                               26.6          24.0
  Engineering services                                      34.0          25.2
  Interest                                                   0.6           0.4
                                                        ------------------------
     Total expenses                                        119.8         110.5
                                                        ------------------------
Income before income taxes and distributions
 on capital securities                                  $   36.7      $   36.4

Income taxes (benefit):
   Current                                                  16.1           8.2
   Deferred                                                 (3.9)          2.7
                                                        ------------------------
     Total income taxes                                 $   12.2      $   10.9

Distribution on capital securities
  of subsidiary trust, net of income tax
  benefits of $2.5 and $2.4                                  4.7           4.5
                                                       -------------------------
Net income                                              $   19.8      $   21.0
                                                        ========================
Per share data:

Net income per common share-basic                       $    0.68     $    0.72
                                                        ========================
Basic weighted-average common shares outstanding            29.1          28.9

Net income per common share-assuming dilution           $    0.68     $    0.71
                                                        ========================
Diluted weighted-average common shares outstanding          34.4          34.5

Dividends declared per share                            $    0.44     $    0.42




See Notes to Consolidated Financial Statements.



                                       3
<PAGE>




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

                                                               Quarter
                                                           Ended March 31,
                                                          2000           1999
                                                    ----------------------------

Net income                                           $     19.8       $    21.0

Other comprehensive income, net of tax:
 Unrealized gains (losses) on securities:

   Unrealized holding gains (losses) arising
    during the period, net of taxes
    (benefits) of $2.3 and ($4.2)                           3.9            (8.0)

   Add: reclassification adjustments for
    gains included in net income                           (8.6)           (4.6)
                                                    ----------------------------

     Total unrealized losses on securities                 (4.7)          (12.6)

   Foreign currency translation adjustments,
     net of income taxes                                   (0.3)            0.3
                                                    ----------------------------

   Other comprehensive income                              (5.0)          (12.3)

                                                    ----------------------------
   Comprehensive income                              $     14.8      $      8.7
                                                    ============================

See Notes to Consolidated Financial Statements.

                                       4
<PAGE>



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

                                                  March 31,
                                                    2000           December 31,
                                                 (Unaudited)           1999
                                            ------------------------------------
Assets:
   Cash and cash equivalents                    $     77.0        $     73.0
   Short-term investments, at cost                    41.1              53.5
   Fixed maturities, at fair value
    (cost - $540.1; $545.7)                          488.6             489.8
   Equity securities, at fair value
    (cost - $310.6;  $316.6)                         364.5             381.8
                                                --------------------------------
     Total cash and invested assets                  971.2             998.1

   Reinsurance assets                                713.8             850.3
   Insurance premiums receivable                      58.2             104.4
   Engineering services receivable                    39.5              39.1
   Fixed assets                                       55.6              58.2
   Prepaid acquisition costs                          43.5              52.9
   Capital lease                                      14.9              13.8
   Deferred income taxes                               3.5               -
   Other assets                                      150.3             146.4
                                                --------------------------------
     Total assets                               $  2,050.5        $  2,263.2
                                                ================================

Liabilities:
   Unearned insurance premiums                  $    324.5        $    420.1
   Claims and adjustment expenses                    735.5             782.3
   Short-term borrowings                              24.5              41.5
   Long-term borrowings                               25.1              25.1
   Capital lease                                      29.0              27.8
   Deferred income taxes                               -                 2.8
   Dividends and distributions on
    capital securities                                18.6              24.0
   Ceded reinsurance payable                          17.9              66.3
   Other liabilities                                  93.2              87.8
                                                --------------------------------
     Total liabilities                             1,268.3           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                   109.0             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 28.9; 29.1)                       10.0              10.0
   Additional paid-in capital                         35.0              36.2
   Accumulated other comprehensive income             (6.9)             (1.9)
   Retained earnings                                 342.7             339.1
   Benefit plans                                      (7.6)             (6.9)
                                                --------------------------------
     Total shareholders' equity                      373.2             376.5
                                                --------------------------------
     Total                                      $  2,050.5        $  2,263.2
                                                ================================

Shareholders' equity per common share           $     12.92       $     12.95

See Notes to Consolidated Financial Statements.

                                       5
<PAGE>


                                 HSB GROUP, INC.
                      Consolidated Statements of Cash Flows
                                    Unaudited
                                  (in millions)

                                                                  Quarter
                                                               Ended March 31,
                                                               2000       1999
                                                            --------------------
Operating Activities:
Net income                                                   $ 19.8     $ 21.0
Adjustments to reconcile net income to net
  cash provided by operating activities:
   Depreciation and amortization                                6.0        5.1
   Deferred  income taxes (benefit)                            (3.9)       2.7
   Realized investment gains, net                             (13.3)      (7.1)
   Distributions on capital securities                          7.2        6.9
   Change in balances:
     Insurance premiums receivable                             46.2       37.0
     Engineering services receivable                           (0.4)      (6.3)
     Prepaid acquisition costs                                  9.4       (3.9)
     Reinsurance assets                                       136.5       (6.9)
     Unearned insurance premiums                              (95.6)     (23.3)
     Claims and adjustment expenses                           (46.8)       7.7
     Ceded reinsurance payable                                (48.4)      (7.2)
     Other                                                      1.2       (3.3)
                                                             -------------------

       Cash provided by operating activities                   17.9       22.4
                                                             -------------------

Investing Activities:
Fixed asset additions, net                                     (1.5)      (3.3)

Investments:
   Sale (purchase) of short-term investments, net              12.3      (28.3)
   Purchase of fixed maturities                               (22.3)     (13.6)
   Proceeds from sale of fixed maturities                      27.0       16.0
   Redemption of fixed maturities                               -          2.7
   Purchase of equity securities                              (34.9)     (56.6)
   Proceeds from sale of equity securities                     55.0       68.1
                                                             -------------------

       Cash provided by (used in) investment activities        35.6      (15.0)
                                                             -------------------

Financing Activities:
(Decrease) increase in short-term borrowings                  (17.1)       4.4
Dividends and distributions on capital securities             (25.3)     (24.4)
Reacquisition of stock                                         (7.1)      (2.2)
Exercise of stock options                                        -         0.2
                                                             -------------------

       Cash used in financing activities                      (49.5)     (22.0)
                                                             -------------------

   Net increase (decrease) in cash and cash equivalents         4.0      (14.6)

   Cash and cash equivalents at beginning of period            73.0       18.3
                                                             -------------------

   Cash and cash equivalents at end of period                $ 77.0     $  3.7
                                                             ===================

Interest paid                                                $  0.9     $  1.3
                                                             -------------------

Federal income tax paid                                      $  3.0     $  1.8
                                                              ------------------
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. 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

                                       7
<PAGE>

          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

         Computation of Earnings per Share for the quarter ended March 31:

<TABLE>
<CAPTION>
                                                            2000                              1999
                                            ---------------------------------    --------------------------------
                                            Income       Shares       Per Share    Income     Shares    Per Share

<S>                                         <C>           <C>          <C>        <C>           <C>       <C>

           Net Income                       $ 19.8                                $ 21.0

           Basic Earnings per Share:
           Income available to common
                shareholders                $ 19.8                                $ 21.0
           Weighted average common
                shares outstanding                        29.1                                  28.9
           Earnings per Share  - basic                                 $ 0.68 *                           $ 0.72 *
           Effect of dilutive securities:
           After-tax distributions on
            convertible capital securities  $  3.4                                $  3.4
            Convertible capital securities                 5.3                                   5.3
            Stock options                                   -                                    0.3

           Diluted Earnings per Share:
           Net Income available to
           common shareholders and
           assumed  conversions             $ 23.2        34.4                    $ 24.4        34.5
           Earnings per Share - assuming
           dilution                                                   $ 0.68 *                            $ 0.71 *
</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

                                       8
<PAGE>

          evaluates the  performance of its segments and allocates  resources to
          them based on net income  (loss).  Segment  assets are not included in
          this evaluation  process.  Interest income and expense are included in
          the results of Investment operations.

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

           For the quarters ended March 31,                   2000        1999
           ---------------------------------------------------------------------

           Revenues from continuing operations
           Insurance premiums:
           Commercial                                    $    88.0     $   80.3
           Global Special Risks                                4.4         15.7
           Engineering services                               37.0         27.6
           Net investment income and
            realized investment gains                         28.2         22.8
                                                       ------------- -----------
           Total revenues from reportable segments           157.6        146.4
           Other segments                                     (1.1)         0.5
                                                       ------------- -----------
           Total revenues                                  $ 156.5      $ 146.9
                                                       ============= ===========
           Net income (loss):
           Commercial                                      $   4.4      $   1.4
           Global Special Risks                               (1.9)         5.2
           Engineering services                                1.3          1.3
           Investments                                        19.1         16.0
                                                       ------------- -----------

           Total net income from reportable segments          22.9         23.9
           Other segments                                     (0.3)          -
           Corporate account                                   1.9          1.6
           Distributions on capital securities                (4.7)        (4.5)
                                                       ------------- -----------
           Net income                                     $   19.8       $ 21.0
                                                       ============= ===========


                                       9
<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                       OF CONSOLIDATED FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                 MARCH 31, 2000

RESULTS OF OPERATIONS
(dollar amounts in millions)

Consolidated Overview
                                                        Quarter Ended
                                                           March 31,
                                                     2000              1999
                                                     ----              ----
Revenues:

Gross earned premiums                            $     182.1         $  208.9
Ceded premiums                                          90.8            112.4
                                                 -----------         --------

Insurance premiums                                      91.3             96.5

Engineering services                                    37.0             27.6

Net investment income                                   14.9             15.7

Realized investment gains                               13.3              7.1
                                                 -----------         --------

Total revenues                                   $     156.5         $  146.9
                                                 -----------         --------


Pre-tax income                                   $      36.7         $   36.4

Income taxes                                            12.2             10.9

Distributions on capital securities, net of tax          4.7              4.5
                                                 -----------         --------

Net income                                       $      19.8         $   21.0
                                                 -----------         --------

Net income per common share:

     Basic                                       $     0.68          $   0.72
     Assuming dilution                           $     0.68          $   0.71



Overview of Results of Operations

The Company's first quarter 2000 after-tax earnings decreased 6 percent from the
first quarter of 1999 due primarily to reduced underwriting  profits,  offset in
part by higher  income from  engineering  services  and income  from  investment
operations. The change in underwriting results reflects higher claim severity in
our  Global  Special  Risk  business,  partially  offset by solid  growth in our
domestic  commercial  equipment  breakdown  business.  In  addition,   insurance
premiums  and  net  income  were  negatively  impacted  by  the  change  in  the
reinsurance  agreements  with  IRI  effective  January  1,  2000.  The  gains in
engineering  services  reflect a 34  percent  increase  in  engineering  service
revenues  over the first  quarter of 1999.  Realized  gains  increased  to $13.3
million for the quarter as the Company  shifted some  investments  out of common
stocks and utilized a portion of the proceeds to fund share repurchases.

                                       10
<PAGE>

The  effective  tax rate for the first  quarter  was 33 percent  compared  to 30
percent for the  comparable  prior period.  The change in the effective tax rate
for the first  quarter of 2000 relates to increases in  non-deductible  goodwill
and less dividends received deductions. 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."




Insurance Operations
                                                         Quarter Ended
                                                            March 31,

                                                     2000              1999
                                                     ----              ----

Gross earned premiums                            $     182.1         $  208.9
Ceded premiums                                          90.8            112.4
                                                 -----------          --------

Insurance premiums                                      91.3             96.5

Claims and adjustment expenses                          38.8             38.3

Underwriting, acquisition and other expenses            46.4             46.6
                                                 -----------           -------

Underwriting gain                                $       6.1         $   11.6
                                                 ============          =======

Loss ratio                                              42.4%            39.7%
Expense ratio                                           50.9%            48.0%
                                                  -----------          -------

Combined ratio                                          93.3%            87.7%
                                                  ===========          =======


Insurance  operations  include the  underwriting  results of The Hartford  Steam
Boiler  Inspection and

                                       11
<PAGE>

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 and various other pools.

Gross earned  premiums in the first  quarter of 2000  decreased  12.8 percent in
comparison to the first quarter of 1999.  This was primarily  attributed to a 31
percent decline in Global Special Risks gross earned premiums,  offset, in part,
by an 11% increase in Commercial  premiums.  The decline in Global Special Risks
gross earned premiums  primarily  resulted from the Company's decision to reduce
its risk bearing  position in Industrial  Risk  Insurers,  effective  January 1,
2000.  The increase in Commercial  gross earned  premiums  related  primarily to
increases  in our  domestic  commercial  assumed  equipment  breakdown  business
through our HSB ReSource product.

Ceded premiums  decreased 19.2 percent for the first quarter of 2000 compared to
the first quarter of 1999.  This is consistent  with the decline in gross earned
premiums for the same period and also reflects  changes in the structure of some
of the Company's reinsurance programs which now utilize significantly less quota
share  reinsurance on certain of our books of business as well as changes in the
IRI agreements.

The loss ratio  increased from 39.7 percent in the first quarter of 1999 to 42.4
percent in the current  quarter.  The  increase  primarily  related to increased
severity in the first quarter of 2000 related to equipment breakdown failures in
our Global Special Risk large risk business. This increase in the loss ratio was
offset, in part, by improvement in the Commercial loss ratio.

The expense  ratio  increased  from 48.0 percent in the first quarter of 1999 to
50.9 percent in first  quarter of 2000.  The  increase in the expense  ratio was
primarily attributed to increases in underwriting and inspection expenses.  This
increase was largely due to the reduced management fees related to the Company's
decision to reduce its risk bearing  position in IRI,  which are  reflected as a
reduction of expenses.  The expense ratio  increase was offset,  in part, by the
domestic  Commercial  expense ratio which  decreased as certain fixed costs were
absorbed on higher net earned premiums.


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

                                                          Quarter Ended
                                                            March 31,
                                                     2000              1999
                                                     ----              ----

Commercial:

   Net earned premiums                           $   88.0           $   80.3
   Net income                                         4.4                1.4

Global Special Risks:
   Net earned premiums                           $    4.4           $   15.7
   Net income                                        (1.9)               5.2


Net earned  premiums in the  Commercial  segment  increased  $7.7 million in the
first  quarter of 2000  compared with the first quarter of 1999 due primarily to
continued growth in our client company business.  Net income for the quarter was
also favorably  impacted by reduced claim  frequency and the absorption of fixed
costs on higher  retained  gross  earned  premiums.  This  resulted in favorable
changes  in the  Commercial  loss and  expense  ratios  compared  with the first
quarter of 1999.

                                       12
<PAGE>

Global  Special Risks' net earned  premiums  declined $11.3 million in the first
quarter  of 2000  compared  to the first  quarter of 1999 due  primarily  to the
changes in the IRI agreements.  In addition,  these  decreases  related to price
erosion and are  reflective  of the  Company's  continued  commitment  to follow
strict pricing and underwriting guidelines. Global Special Risks' net income for
first  quarter of 2000  compared  to the first  quarter  of 1999 was  negatively
impacted by increased loss severity and reduced  underwriting  income  resulting
from changes in the IRI agreements.



Engineering Services Operations

                                                   Quarter Ended
                                                      March 31
                                               2000              1999
                                               ----              ----

Engineering services revenues               $  37.0            $ 27.6
Engineering services expenses                  34.0              25.2
                                            -------             ------

Operating gain                              $   3.0            $  2.4
                                            =======             ======

Net margin                                     8.0%               8.4%


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 increased $9.4 million or 34 percent in the first
quarter of 2000 compared to the same period in 1999.  The growth in  Engineering
services  revenues  for the quarter was due  primarily  to growth in license and
service fees which  resulted from the Company's new agreement  with Enron Energy
Services  (Enron) to  provide  energy  services,  project  management  and other
technical  assistance.  Engineering  revenue  growth  also  reflected  increased
revenue  generated  by  Structural,  acquired  in July 1999,  and IPT as well as
engineering  revenue  resulting  from the new  agreements  with  IRI,  effective
January 1, 2000.

Engineering  services  operating margin was 8.0 percent for the first quarter of
2000  compared  to 8.4 percent  for the first  quarter of 1999 on  substantially
increased  engineering  services  revenue.  The engineering  services  operating
margin for the first quarter of 2000 reflected 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 first  quarter of
2000. This negative impact was offset by margins earned on the Enron  agreement.
IPT may continue to have an adverse  impact on  engineering  services  operating
margins during 2000 as the Company continues to develop this business.

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

                                       13
<PAGE>


Investment Operations

                                                    Quarter Ended
                                                       March 31

                                               2000             1999
                                               ----             ----

Net investment income                       $    14.9         $    15.7
Realized investment gains                        13.3               7.1
                                            ---------         ---------
Pretax income from
         investment operations              $    28.2         $    22.8
                                            ---------         ---------



Income from investment  operations for the first quarter  increased $5.4 million
compared  to the first  quarter of 1999,  primarily  due to  increased  realized
investment gains. The increase in realized investment gains in the first quarter
of 2000 as compared  to the first  quarter of 1999  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 first quarter of
2000  include $2.8 million of losses  arising  from  declines in the  realizable
value of  investments  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.


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.

                                       14
<PAGE>


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 March 31, 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 $47.4 million and $67.8,
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 $47.4 and $67.8 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 8.11 at
March 31, 2000, essentially the same as at December 31, 1999.

The Company's long-term debt and convertible capital securities have been issued
at fixed rates, and as such,  interest expense would not be impacted by interest
rate shifts.  The impact of 100 and 150 basis point  increases in interest rates
on the fixed rate debt would  result in a  decrease  in the market  value of the
debt by less than  $0.1  million  each.  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 $250.8 million and $ 240.0 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 March 31, 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 $19.5  and  $48.7  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  slightly  from 0.98 at  December  31, 1999 to .97 at March 31,
2000. This change is generally attributed to portfolio  repositioning during the
period.

                                       15
<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 March 31, 2000, with all other  variables held constant.  A 10 percent
and 20 percent  strengthening  of the U.S.  dollar  would result in decreases of
$6.1 and $11.9 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 March 31, 2000           Value        Rate Risk     Risk           Risk
--------------------------------------------------------------------------------
Fixed maturity securities   $488.6       $ (33.9)     $   (2.6)    $    -
Equity securities            364.5         (12.8)         (2.0)       (19.5)
Short term investments        41.1          (0.7)         (1.5)         -
                           -----------------------------------------------------
     Total all securities   $894.2       $ (47.4)     $   (6.1)    $  (19.5)
                           -----------------------------------------------------

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 March 31, 2000           Value        Rate Risk    Risk          Risk
--------------------------------------------------------------------------------
Fixed maturity securities   $488.6       $ (48.7)     $   (5.1)    $    -
Equity securities            364.5         (18.1)         (4.0)       (48.7)
Short term investments        41.5          (1.0)         (2.8)         -
                           -----------------------------------------------------
     Total all securities   $894.2       $ (67.8)     $  (11.9)    $  (48.7)
                           -----------------------------------------------------


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 quarter of 2000  decreased  $5.0 million as
compared to the decrease of $12.3 million in the same period in 1999.  Exclusive
of realized  gains,  the decrease in 2000 when  compared to the first quarter of
1999 is mainly due to rising interest rates.

                                       16
<PAGE>


Liquidity and Capital Resources

                                                           Balances at
                                                   March 31,        December 31,
                                                     2000                1999
                                                   ---------        ------------

Total assets                                      $ 2,050.5          $ 2,263.2
Short-term investments                                 41.1               53.5
Cash and cash equivalents                              77.0               73.0
Short-term borrowings                                  24.5               41.5
Long-term borrowings                                   25.1               25.1
Capital securities of subsidiary Trust I              109.0              109.0
Capital securities of subsidiary Trust II             300.0              300.0
Common shareholder's equity                           373.2              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 $17.9 million in the first three months of
2000  compared to $22.4  million for the same period in 1999.  The  decreases in
reinsurance assets,  insurance premiums  receivable,  prepaid acquisition costs,
unearned insurance premiums,  claims and adjustments expenses, ceded reinsurance
payable and other  liabilities  on the  Consolidated  Statement of Position from
December  31,  1999 to March  31,  2000  largely  relate to  changes  in the IRI
arrangement,  which became effective  January 1, 2000. This trend is expected to
continue  during  2000.  As a  result  of the  changes  in the IRI  arrangement,
effective  for risks  arising  on or after  January  1,  2000,  HSBIIC no longer
retains 85 percent of the  equipment  breakdown  insurance and 15 percent of the
property insurance of the combined  insurance  portfolio.  In addition,  the new
agreements with IRI, call 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.

Capital resources consist of shareholders'  equity,  capital securities and debt
outstanding,  and represent  those funds deployed or available to be deployed to
support business  operations.  Common  shareholders' equity of $373.2 million at
March 31, 2000, decreased by $3.3 million since December 31, 1999. The reduction
in shareholders'  equity was caused by the impact of rising interest rate levels
on our fixed income investments.  The decrease primarily reflects  comprehensive
income of $14.8 million less dividends of $12.5 million and stock repurchases of
$7.0  million.  During  the  first  quarter  of 2000,  the  Company  repurchased
approximately 280,000 shares or about 1 percent of its outstanding shares.


At March 31, 2000,  HSBIIC had  significant  short-term and long-term  borrowing
capacity.  HSBIIC  is  currently  authorized  to  issue  up to  $75  million  of
commercial   paper.   Commercial  paper   outstanding  at  March  31,  2000  was
approximately $20 million. The weighted-average interest rate was 6.0 percent at
March 31,  2000.  In 1999,  Standard  & Poor's and Duff & Phelps  credit  rating
services reaffirmed their highest ratings for the commercial paper.

                                       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;  the adequacy of loss reserves;
changes in asset  valuations;  consolidation  and restructuring in the insurance
industry;   changes  in  the  Company's   participation  in  joint  underwriting
associations,  and in  particular  its  arrangement  with  HSB  Industrial  Risk
Insurers; changes in the demand and customer base for engineering and inspection
services  offered by the Company,  whether  resulting from changes in the law or
otherwise, and other general market conditions.


PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

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

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  January  18, 2000  reporting  on the  anticipated  1999 net
     income.

     Form 8-K dated  January 24, 2000  reporting on the fourth  quarter and 1999
     year-end results and announcing the declaration of a dividend.

     Form 8-K dated  March 6, 2000  announcing  that  Richard  H. Booth has been
     elected chairman of the board.



                                       18
<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, 2000           By:      /s/  Saul L. Basch
                                             Saul L. Basch
                                             Senior Vice President,
                                             Treasurer and
                                             Chief Financial Officer


Date:   May 15, 2000           By:     /s/  Robert C. Walker
                                            Robert C. Walker
                                            Senior Vice President
                                            and General Counsel



                                       19