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 September 30, 1997

                                       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 September 30, 1997: 19,151,742



                                       1
<PAGE>




                                 HSB GROUP, INC.

                                      INDEX



PART I   FINANCIAL INFORMATION                                            PAGE

   Consolidated Statements of Operations for the
   Quarters Ended September 30, 1997 and 1996 (unaudited)................. 3

   Consolidated Statements of Financial Position as
   of September 30, 1997 (unaudited) and December 31, 1996................ 4

   Consolidated Statements of Cash Flows for the
   Nine Months Ended September 30, 1997 and 1996
   (unaudited)............................................................ 5

   Notes to Consolidated Financial Statements (unaudited)................. 6

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

PART II  OTHER INFORMATION

Item 1 - Legal Proceedings............................................... 20
Item 6 - Exhibits and Reports on Form 8-K................................ 22

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



                                       2
<PAGE>


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





                                                               Quarter                   Nine Months
                                                         Ended September 30           Ended September 30

Revenues:                                               1997        1996             1997         1996
                                                    ----------   ----------       ---------     --------
<CAPTION>
<S>                                                <C>           <C>              <C>           <C>    

  Insurance premiums                               $     121.3   $    113.8       $   360.9     $  335.1
  Net engineering services                                15.5         14.0            45.2         40.8
  Net investment income                                    9.1          7.6            25.8         23.5
  Realized investment gains                                2.3          2.5             6.2          8.5
                                                   -----------   ----------       ---------     --------
     Total revenues                                      148.2        137.9           438.1        407.9
                                                   -----------   ----------       ---------     --------
                                                 
Expenses:                                        
  Claims and adjustment                                   54.1         54.5           157.0        155.4
  Policy acquisition                                      23.5         21.4            67.5         63.9
  Underwriting and inspection                             34.2         34.2           105.5        102.3
  Net engineering services                                14.5         12.4            42.3         36.0
  Interest                                                 0.4           -              0.9          0.4
                                                   -----------    ----------      ----------    ---------
     Total expenses                                      126.7        122.5           373.2        358.0
                                                   -----------    ----------      ----------    ---------
                                                 
Income from continuing 
operations before income 
taxes and distributions
on capital securities                               $     21.5   $     15.4       $    64.9     $   49.9


Income taxes:
   Current                                                14.2          3.2            26.8         13.6
   Deferred                                               (8.9)         0.3           (10.3)        (1.9)
                                                   -----------    ----------      ----------    ---------


     Total income taxes                             $      5.3   $      3.5       $    16.5     $   11.7

Distribution on capital
securities of subsidiary trust,
  net of taxes                                             1.0            -             1.0          -



                                                   -----------    ----------      ----------    ---------
Income from continuing operations                   $     15.2   $     11.9       $    47.4     $   38.2

Discontinued operations:
     Income from operations of Radian
     International LLC net of income
     taxes of $0.0; ($0.1); $0.0; and $2.8                 -           (0.3)            -            3.8
                                                   -----------    ----------      ----------    ---------

     Net income                                     $     15.2   $     11.6       $    47.4     $   42.0
                                                   ===========    ==========      ==========    =========
                                                 

Net income per common share:
    Income from continuing operations               $      0.76  $      0.59      $     2.35    $    1.88
    Discontinued operations                                -           (0.01)           -            0.19
                                                   ------------   ----------      ----------    ---------

    Net income                                      $      0.76  $      0.58      $     2.35    $    2.07
                                                   ============   ==========        ========    =========

Dividends declared per common share                 $      0.60  $      0.57      $     1.74    $    1.71

Average common shares outstanding
  and common stock equivalents                            19.9         20.1            20.1         20.2

See Notes to Consolidated Financial Statements.
</TABLE>



                                       3
<PAGE>



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


                                                  September 30,   December 31,
                                                       1997           1996
                                                  (Unaudited)
                                                  ---------        --------
Assets:
     Cash                                         $      6.6      $    4.5
     Short-term investments, at cost                   133.3          97.9
     Fixed maturities, at fair value
       (cost -$239.3; $231.3)                          247.6         235.8
     Equity securities, at fair value
       (cost - $231.5  $182.9 )                        325.8         262.7
                                                  ----------       --------
       Total cash and invested assets                  713.3         600.9

     Insurance premiums receivable                     126.8         106.4
     Engineering services receivable                    12.9          11.7
     Fixed assets                                       28.4          31.7
     Prepaid acquisition costs                          45.5          40.6
     Capital lease                                      15.5          16.1
     Investment in Radian                               85.0          79.7
     Reinsurance assets                                146.4         162.9
     Other assets                                       82.9          66.3
                                                  ----------       --------
         Total assets                            $   1,256.7     $ 1,116.3
                                                  ==========       ========
 
Liabilities:
     Unearned insurance premiums                 $     295.8     $   270.6
     Claims and adjustment expenses                    278.8         302.9
     Short-term borrowings                              18.0           3.2
     Long-term borrowings                               25.1          25.1
     Capital lease                                      27.9          27.9
     Deferred income taxes                              21.1          23.7
     Dividends payable                                  13.3          11.4
     Other liabilities                                 127.3          85.9
                                                  ----------       --------
         Total liabilities                             807.3         750.7
                                                  ----------       --------

Convertible redeemable preferred stock-
     Series B (stated and redemption
     value; shares authorized, issued
     and outstanding .002)                              20.0          20.0

Company obligated mandatorily redeemable
     capital securities of subsidiary
     trust holding solely junior 
     subordinated deferrable interest
     debenture of the Company, net of
     discount of $1.1 million                          108.9            -

Shareholders' equity:
     Common stock (stated value; shares 
       authorized 50.0; shares issued
       21.3; shares outstanding 19.2; 20.0)             10.0          10.0
     Additional paid-in capital                         30.7          32.0
     Unrealized investment gains, net of tax            63.4          52.8
     Retained earnings                                 221.2         255.1
     Benefit plans                                      (4.8)         (4.3)
                                                  ----------        ---------
           Total shareholders' equity                  320.5         345.6
                                                  ----------        ---------
           Total                                 $   1,256.7     $ 1,116.3
                                                  ==========        =========

       Shareholders' equity per common share            16.73         17.25

See Notes to Consolidated Financial Statements.



                                       4
<PAGE>



                                HSB Group, Inc.
                      Consolidated Statements of Cash Flows
                                  (in millions)

                                                        Nine Months Ended
                                                          September 30
                                                    --------------------------
                                                       1997           1996
                                                    -----------    -----------
Operating activities:
Net income                                          $    47.4    $   42.0
Adjustments to reconcile net income to
     cash provided by operating activities:
     Depreciation and amortization                        5.1         7.8
     Deferred  income taxes                             (10.0)       (1.9)
     Realized investment gains including 
        market adjustment for derivative 
        investments                                      (6.2)       (8.5)
     Change in:
        Insurance premiums receivable                   (20.4)      (19.3)
        Engineering services receivable                  (1.2)       (2.2)
        Prepaid acquisition costs                        (4.9)       (8.8)
        Reinsurance assets                               16.5       (67.5)
        Unearned insurance premiums                      25.2        54.2
        Claims and adjustment expenses                  (24.1)       65.8
        Distributions on capital securities               1.6         0.0
        Investment in Radian                             (5.3)        9.3
        Other                                            (3.9)       (2.0)
                                                      --------    --------

          Cash provided by operating 
          activities                                     19.8        68.9
                                                      --------    --------

Investing activities:
Fixed asset additions, net                                0.1         0.2

Investments:
     Purchase of short-term investments, net            (35.4)       (4.9)
     Purchase of fixed maturities                       (51.4)      (65.3)
     Proceeds from sale of fixed maturities              26.0        74.7
     Redemption of fixed maturities                      13.1         5.5
     Purchase of equity securities                     (178.1)     (113.7)
     Proceeds from sale of equity securities            167.0        91.2
     Cash transferred to investment in Radian             -          (0.8)
                                                      --------    --------

           Cash used in investment activities           (58.7)      (13.1)
                                                      --------    --------

Financing activities:
Proceeds from Company-obligated mandatorily 
     redeemable capital securities of 
     subsidiary trust                                   108.9      
Increase (decrease) in short-term borrowings             14.8        (9.8)
Increase (decrease) in long-term debt                     -          (0.5)
Dividends paid to shareholders                          (35.0)      (34.7)
Reacquisition of stock                                  (51.6)      (13.0)
Exercise of stock options                                 4.0         1.0
                                                      --------    --------

           Cash provided by (used in) 
           financing activities                          41.1       (57.0)
                                                      --------    --------

     Net increase in cash                                 2.2        (1.2)

     Cash at beginning of period                          4.5         8.6
                                                      --------    --------

     Cash at end of period                            $   6.7     $   7.4
                                                      ========    ========

Interest paid                                         $   2.0     $   1.7
                                                      --------    --------

Federal income tax paid                               $  25.7     $  16.7
                                                      --------    --------

See Notes to Consolidated Financial Statements.





                                       5
<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 1996  Annual  Report.
         Certain  amounts for 1996 have been  reclassified  to conform  with the
         1997 presentation.

2.       Discontinued Operations

         In 1996,  the Company  entered into a joint venture  agreement with The
         Dow Chemical Company (Dow) to form a new company,  Radian International
         LLC  (Radian  LLC).  The  terms  of the  agreement  provided  that  HSB
         contribute  the net assets of its  Radian  Corp.  subsidiary  into this
         joint venture for a 40%  ownership.  Income was subject to a preference
         return to HSB in the first two years.  The  agreement  provided HSB the
         option  to put its  share of the  venture  to Dow any time  during  the
         period  from  December  31,  1997 to  December  31,  1998  upon  giving
         appropriate  notice.  On July  28,  1997  the HSB  Board  of  Directors
         ratified management's decision to put its share of Radian LLC to Dow on
         or about January 1, 1998 for approximately $143 million. This amount is
         not  subject to any  material  adjustment  due to the future  operating
         results of Radian LLC;  therefore this will result in a pre-tax gain of
         approximately $57 million. Due to this decision,  the results of Radian
         LLC have been  classified as  discontinued  operations.  HSB's share of
         Radian LLC's losses  generated  in the third  quarter of  approximately
         $1.2 million pre-tax have been deferred until HSB's share of Radian LLC
         has been transferred to Dow.

3.       Industrial Risk Insurers

         On December 1, 1996 HSB increased its  participation in Industrial Risk
         Insurers (IRI) from 14% to 23.5%. IRI is an  unincorporated,  voluntary
         property  underwriting  association currently comprised of twenty-three
         property casualty insurance companies. IRI primarily writes policies on
         a syndicate basis which  specifies to the insured the percentage  share
         of risk  accepted  by  each  member  of the  association.  Each  member
         company,  therefore,  operates as a direct insurer or reinsurer on such
         policies  and   participates  in  the  premiums  and  losses  generated
         thereunder in proportion to its membership interest.

         In essence,  the IRI facilitates the proportional sharing of risk under
         one policy where each member is essentially considered to be the direct
         writer  for  reporting,  premium  tax and  other  regulatory  purposes.
         Liability  on such  policies is several and not joint,  and  therefore,
         members  are  not  responsible  for  policy  liabilities  of the  other
         members. An 

                                       6
<PAGE>

         increased  participation  does not expose the Company to the effect of
         adverse loss  development  on claims  incurred  prior to the effective
         date of the increase.

         Other  than a  nominal  deposit,  which is  refunded  if  participation
         ceases,  there is no cost to becoming a member of the IRI.  Members can
         change or terminate their  participation on an annual basis.  Typically
         participation  levels vary based on a member's  expectations  of future
         profits.  Therefore,  the form and extent of HSB's participation in IRI
         may vary in the future.

4.       Shareholders' Equity

         The Connecticut  Business  Corporation  Act, which became  effective on
         January 1, 1997, eliminated the concept of treasury shares.  Therefore,
         shares  reacquired by the Company  constitute  authorized  but unissued
         shares.  As a result of this change in law, the Company  eliminated the
         caption  Treasury  Stock from its balance  sheet and  reclassified  the
         amounts to  additional  paid-in  capital and retained  earnings.  These
         amounts were $107.2  million as of September 30, 1997 and $59.5 million
         as of December 31, 1996.  The  reclassifications  were  distributed  as
         follows:

                                September 30, 1997        December 31, 1996
                                ------------------        -----------------
         Additional Paid In         $    3.5               $    2.0
         Retained Earnings             103.7                   57.5
                                       -----                  -----
         Total                      $  107.2               $   59.5

         On  December  30,  1996,  the  Company  issued  Convertible  Redeemable
         Preferred  Stock.  The stock is convertible  into 398,406 shares of HSB
         common  stock at a price of $50.20 per share and may be redeemed at the
         option of the Company on or after the fifth anniversary of issuance and
         by the holder after the eighth anniversary.  As a result of the stock's
         redemption features, it has been included in the "mezzanine" section of
         the balance sheet located between liabilities and shareholders' equity.
         On October 29, 1997, the holder  converted its  convertible  redeemable
         preferred stock into common stock.

5.       Derivative Instruments

         On December 19, 1996, the Company  entered into three "zero cost collar
         contracts"  to mitigate  the effects of market risk on its U. S. common
         stock  portfolio  (which,  for management  purposes,  included  certain
         convertible  preferreds).  Each  contract  had a notional  value of $50
         million and maturity  dates ranging from November 1997 to January 1998.
         The  contracts  are European  style,  which means they only settle upon
         maturity. The contracts, which were entered into when the S&P 500 Index
         was 744.3,  allow the Company to recover from the  counterparty  if the
         index is below 695.2 at the time of maturity,  and requires the Company
         to reimburse the counterparty if the index is above a range of 811.3 to
         818.7 at the time of maturity.

                                       7
<PAGE>

         The Company  entered into these  contracts with the intent to hold such
         contracts  until maturity.  However,  based upon price movements in the
         S&P 500 Index since  December 31, 1996, the contracts do have a current
         estimated  market value of $(29.5)  million,  which represents the cost
         the Company  would incur if it had canceled the  contracts at September
         30, 1997.  As of September 30, 1997,  the Company  recorded the mark to
         market valuation of $29.5 million as a reduction of realized investment
         gains.  At present such contracts are included in other  liabilities in
         the Statement of Financial Position.

         At September 30, 1997,  the S&P 500 Index was 947.28,  which is outside
         the bounds of the collar. If the contracts had reached their expiration
         dates at the end of the  quarter,  HSB would have been  required to pay
         approximately  $26.5 million to its counterparty and an additional $3.0
         million of realized  gains would have been  recognized in the statement
         of income.

         The  Company's  U.S.  common stock  portfolio  has  experienced a total
         return  of  $46  million   (which   includes  price   appreciation   of
         approximately $41 million) since December 31, 1996, and has had a price
         movement correlation with the S&P 500 Index well in excess of 80%.

         The collar subjects the Company to market and counterparty credit risk.
         The Company manages this exposure by frequently modeling the effects of
         potential  future price  movements on the value of the collar and HSB's
         portfolio  and  by  entering  into   contracts   with   internationally
         recognized financial institutions,  which are expected to perform under
         the terms of the contract,  and by evaluating the credit  worthiness of
         such  institutions  by taking  into  account  credit  ratings and other
         factors.

6.       Recent Accounting Developments

         In February  1997,  the  Financial  Accounting  Standards  Board (FASB)
         issued  Statement of  Financial  Accounting  Standards  (SFAS) No. 128,
         "Earnings  per  Share".  This  statement   establishes   standards  for
         computing  and  presenting  earnings per share  (EPS).  It replaces 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 will be
         effective  for year end 1997  financial  statements.  Had this standard
         been in effect as of the first  quarter  1996,  EPS would  have been as
         follows:
                           September 30, 1997      September 30, 1996
                           ------------------      ------------------
                           Quarter         YTD      Quarter           YTD
                           -------        ----      -------          -----
         Basic             $  .77         $2.37      $ .58           $2.08
         Diluted           $  .76         $2.35      $ .58           $2.07
         As Reported       $  .76         $2.35      $ .58           $2.07


                                       8
<PAGE>

         In June 1997 the FASB issued SFAS 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  will  be  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 in 1998.

7.       Legal Proceedings

         The Company is involved in three 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.

         A lower court ruling in one of these cases held that an  explosion  did
         occur,  and that the  Company  was not liable for losses of the insured
         resulting from the explosion. In a further action, the court denied the
         Company's motion for summary  judgment on certain issues,  thus leaving
         the  Company   potentially  liable  for  certain   unquantified  losses
         resulting from events prior to the  explosion.  In the first quarter of
         1997 the Company and the property insurer jointly settled the case with
         the insured.  The Company's  ultimate share of the  settlement  will be
         determined in an arbitration  proceeding with the property insurer. The
         Company has incurred  gross  losses and LAE of $40.7  million and a net
         loss  after  taking  into  account  reinsurance  recoverables  of  $6.5
         million,  of which $5 million  represents  claim cost and the remaining
         $1.5  million  represents  loss  adjustment  expenses.  As a result  of
         payments made to date, at September 30, 1997 the Company  carried gross
         loss and LAE reserves of $2.8 million and recoverables  from reinsurers
         of $2.9 million.

         The Company  has accrued  $6.5  million  with  respect to the other two
         cases for potential loss adjustment expenses,  including legal costs to
         defend the Company'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 the Company is held liable for
         one or both of the remaining claims, amounts in excess of the Company's
         

                                       9
<PAGE>

         net maximum aggregate retention of $8.5 million is recoverable from the
         Company's  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 the Company'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.  The  Company's  reinsurance  contracts do not require the
         Company to  reimburse  its  reinsurers  for any losses such  reinsurers
         might incur should these cases not be decided in the  Company's  favor.
         Nevertheless,  reinsurers  often quote rates for future coverages based
         upon their or other  reinsurer's  experience  on a particular  account.
         Therefore,  in the event the Company's  reinsurers pay significant sums
         pursuant to the arbitration or litigation  proceedings described above,
         it is likely the Company's  reinsurance  rates would increase in future
         periods. However, given the insured capacity that exists in reinsurance
         markets  worldwide,  coupled with the Company's  ability to negotiate a
         redesign  or  restructuring  of its  reinsurance  program,  it does not
         necessarily mean that such an increase would be material.

         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.

  8.     Holding Company Formation

         At a special  meeting  of the  Company on June 23,  1997,  shareholders
         voted to approve a proposal  which  enabled  the  Company to form a new
         holding  company,  HSB  Group,  Inc.  Shareholders  of  Hartford  Steam
         Boiler's  common  stock  automatically  became  holders of HSB  Group's
         common stock through a share exchange approved by the shareholders, and
         certificates   representing   Hartford   Steam   Boiler   common  stock
         automatically  represent the  corresponding  shares of HSB Group common
         stock.

  9.     Capital Securities

         On July 10, 1997, HSB Group, Inc. announced the sale of $110 million of
         30 year Capital Securities in a private  placement.  The securities are
         non-callable  for  ten  years  and  may  be  called  earlier  upon  the
         occurrence  of a Tax Event.  The  securities  were  issued  through HSB
         Capital I, a Delaware  business  trust created by HSB Group,  Inc. at a
         floating rate tied to 90 day LIBOR.  The initial coupon is 6.7 percent.
         Holders  of  the  Capital   Securities  will  be  entitled  to  receive
         preferential

                                       10
<PAGE>

         cumulative cash distributions  accumulating from the date
         of original issuance and payable quarterly in arrears.  The Company has
         the right to defer payment of interest at any time or from time to time
         for a period  not  exceeding  20  consecutive  quarterly  periods  with
         respect to each deferral period.  During an extension period,  interest
         will  continue  to  accrue  and the  amount of  distributions  to which
         holders of the Capital Securities are entitled will accumulate, and the
         Company will be prohibited from paying any cash dividends on its common
         stock. The Company has irrevocably and  unconditionally  guaranteed all
         of the Issuer Trust's  obligations  under the Capital  Securities.  The
         Company  expects to use the  proceeds for general  corporate  purposes,
         which  may  include  the  repurchase  of  HSB  common  stock;   funding
         investments in, or extensions of credit to, subsidiaries;  repayment of
         maturing debt; and financing possible future acquisitions.  Pursuant to
         certain registration rights contained in the agreement with the initial
         purchasers  of  the  Capital  Securities,   the  Company  has  filed  a
         registration  statement for capital securities with virtually identical
         terms  which   holders  can  receive  in  exchange   for  the  original
         securities.

10.      Computation of Earnings Per Share

                                        Quarter Ended         Year to Date
                                     September 30, 1997     September 30, 1997
                                      ------------------     ------------------
          Net Income                       $15.2  (A)         $  47.4  (A)
                                           =====              =======

          Weighted Average Common
                Shares Outstanding          19.3                 19.6
          Common Stock Equivalents
                Preferred Stock - assuming
                     conversion               .4                   .4
                Options                       .2                   .1
                                           ------             -------

                                            19.9  (B)            20.1  (B)
                                           ======             =======

          EPS - (A)/(B)                     $0.76                $2.35*



         * Computation excludes rounding.



                                       11
<PAGE>





                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                       OF CONSOLIDATED FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 1997

RESULTS OF OPERATIONS
 (dollar amounts in millions)
Consolidated Overview
---------------------
                                            Quarter Ended     Nine Months Ended
                                              September 30       September 30
                                         -----------------     ---------------
                                         1997        1996      1997       1996
                                         ----        ----      ----       ----

Insurance premium                        $121.3    $113.8    $360.9     $335.1

Net engineering services revenue           15.5      14.0      45.2       40.8

Net investment income                       9.1       7.6      25.8       23.5

Realized investment gains                   2.3       2.5       6.2        8.5
                                       --------    -------   --------   -------

    Total revenues                       $148.2   $ 137.9   $ 438.1     $407.9
                                         ======    =======   ======     ======

Income from continuing operations        $ 15.2   $  11.9   $  47.4     $ 38.2
                                       --------    -------   --------   -------

Net income                               $ 15.2   $  11.6   $  47.4     $ 42.0
                                       ========    =======   ========   =======

Income from continuing operations

per common share                         $  0.76  $   0.59  $   2.35    $  1.88
                                       ---------   -------   --------   -------



Net income per common share              $  0.76  $   0.58  $   2.35    $  2.07
                                       =========   =======   ========   =======


Net income per common share for the third  quarter of 1997  increased 31 percent
from the third quarter of 1996 and increased 14 percent in the first nine months
of 1997 compared to 1996 due to significantly  higher  underwriting gains in the
Company's  insurance  operations.  On  July  28,  1997  the HSB  Board  ratified
management's  decision  to  exercise  its  option  to put its  share  of  Radian
International  LLC to Dow on or about  January  1, 1998 for  approximately  $143
million. Due to this decision, the results of Radian International LLC have been
classified as discontinued  operations and losses generated in the third quarter
of  approximately  $1.2 million  pre-tax have been deferred until HSB's share of
Radian LLC has been  transferred  to Dow. In comparison to 1996 results,  income
per share from continuing operations increased 29 percent and 25 percent for the
third quarter and year to date respectively.

Insurance  premiums  grew 7 percent in the quarter  and 8 percent  year to date,
with the increased  participation in IRI a contributing factor as well as growth
in both the domestic and  international  books of  business.  The third  quarter
combined  ratio  improved from 96.3 percent in 1996 to 92.0 

                                       12
<PAGE>

percent in 1997. Net engineering  services revenue  increased 11 percent for the
third quarter and 11 percent year to date  compared to  comparable  periods last
year.

The effective tax rates on continuing  operations for the third quarter and year
to date were 25 percent compared to 23 percent for the comparable prior periods.
Tax rate  fluctuations  occur as underwriting  and engineering  services results
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 February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 128,  "Earnings per Share".  This statement
establishes  standards for computing and presenting earnings per share (EPS). It
replaces 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 will be effective for year end
1997 financial statements.  Had this standard been in effect for 1997, basic EPS
would have  increased $.01 for the third quarter to $.77 and increased $.02 year
to date to $2.37.

In June 1997 the FASB issued SFAS 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
will include a presentation of items such
as market value  adjustments of securities,  foreign currency  translation,  and
certain  adjustments  made for benefit  plans.  This statement will be 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
in 1998.

Other Developments
------------------

At a special  meeting  for the Company on June 23,  1997  shareholders  voted to
approve a proposal which enabled the Company to form a new holding company,  HSB
Group, Inc.  Shareholders of Hartford Steam Boiler's common stock  automatically
became holders of HSB Group's common stock through a share exchange  approved by
the  shareholders,  and certificates  representing  Hartford Steam Boiler common
stock  automatically  represent  the  corresponding  shares of HSB Group  common
stock.


                                       13
<PAGE>


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

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

On December 1, 1996 HSB increased its  participation in Industrial Risk Insurers
(IRI)  from  14%  to  23.5%.  IRI  is  an  unincorporated,   voluntary  property
underwriting  association  currently comprised of twenty-three property casualty
insurance  companies.  IRI primarily  writes policies on a syndicate basis which
specifies to the insured the percentage share of risk accepted by each member of
the association. Each member company, therefore, operates as a direct insurer or
reinsurer on such policies and participates in the premiums and losses generated
thereunder in proportion to its membership interest.

In  essence,  the IRI  facilitates  the  proportional  sharing of risk under one
policy where each member is  essentially  considered to be the direct writer for
reporting, premium tax and other regulatory purposes. Liability on such policies
is several and not joint, and therefore,  members are not responsible for policy
liabilities of the other members. An increased participation does not expose the
Company to the effect of adverse loss  development  on claims  incurred prior to
the effective date of the increase.

Other than a nominal deposit,  which is refunded if participation  ceases, there
is no cost to  becoming a member of the IRI.  Members  can  change or  terminate
their  participation  on an annual basis.  Typically  participation  levels vary
based on a member's  expectations  of future  profits.  Therefore,  the form and
extent of HSB's participation in IRI may vary in the future.

IRI has a fiscal year ending November 30, and provides reports to its members on
a quarterly basis. As a result,  the Company's  increased  participation to 23.5
percent has initially been reflected in the first quarter  financial results for
1997.


                                       14
<PAGE>


                                       Quarter Ended         Nine Months Ended
                                        September 30            September 30
                                 ---------------------      --------------------


                                    1997        1996        1997          1996
                                    ----        ----        ----          ----

Gross earned premium                $151.6    $ 143.1      $ 456.6      $ 414.5

Ceded premium                         30.3       29.3         95.7         79.4
                                 ---------    ---------    --------    ---------

Insurance premium                    121.3      113.8        360.9        335.1

Claims and adjustment expenses        54.1       54.5        157.0        155.4

Underwriting, acquisition

         and other expenses           57.7       55.6        173.0        166.2
                                 ---------    ---------    --------    ---------

Underwriting gain                $     9.5    $   3.7     $   30.9    $    13.5
                                 ==========   =========   ========     =========




Loss ratio                           44.6%       47.9%       43.5%         46.4%
Expense ratio                        47.4%       48.4%       47.8%         49.1%
                                  ----------  ----------  --------     ---------

Combined ratio                       92.0%       96.3%       91.3%         95.5%
                                  ==========  ==========  ========     =========

Gross earned  premiums in the third quarter and year to date increased 6 percent
and 10 percent from the comparable  periods in 1996. This increase was primarily
attributable  to the  increased  participation  in IRI ($3.1  million  and $19.6
million)  and to  growth in both  domestic  and  global  markets.  Gross  earned
premiums representing coverage outside the U.S. increased 9 percent in the third
quarter  and 17  percent  year to date from the  comparable  period in 1996.  In
certain areas of the Company's direct domestic and international businesses, the
market is experiencing price erosion. HSB will not write business at rates which
would  lessen our ability to maintain  underwriting  profit.  Increases in ceded
premium of 3 percent in the  current  quarter  and 21 percent  year to date were
primarily  due to the  additional  participation  in IRI  and  the  purchase  of
facultative reinsurance at EIL.

The loss ratio  decreased from 47.9 percent in the third quarter of 1996 to 44.6
percent in the current quarter and from 46.4 percent in the first nine months of
1996 to 43.5 percent in the first nine months of 1997. In 1996,  high  frequency
of claims and unusually  severe winter  weather  impacted the loss ratio.  Gross
claims and  adjustment  expenses for the first nine months of 1997 and 1996 were
$217.9 million and $214.2 million, respectively.

The expense ratio improved in both the quarter and year to date from  comparable
periods in the previous year as the growth rate in earned  premium  exceeded the
growth rate in underwriting and

                                       15
<PAGE>

inspection  expenses.  Underwriting,  acquisition  and other expenses  increased
approximately  4 percent in the third quarter and year to date  primarily due to
increased participation in IRI.

Through its UK subsidiary,  HSB-EIL, the Company writes business in Malaysia and
is required to maintain approximately 50 million ringgit denominated investments
on deposit in that country. The Company intends to maintain its current level of
deposits  in that  currency,  which  equates to $16  million.  Due to the recent
fluctuations of currencies in southeast  Asia,  realized  investment  gains were
reduced  by  approximately  $4  million  during  the  quarter  and year to date,
although there have been no sales out of such investments.

Engineering Services Operations
-------------------------------

                                       Quarter Ended         Nine Months Ended
                                        September 30            September 30
                                    ------------------       ------------------

                                    1997        1996            1997      1996
                                    ----        ----            ----      ----

Net engineering services revenue   $ 15.5     $ 14.0         $  45.2   $  40.8
Net engineering services expenses    14.5       12.4            42.3      36.0
                                    -----       ----            ----      ----

Operating gain                     $  1.0     $  1.6         $   2.9   $   4.8
                                    =====       ====            ====      ====

Net margin                            6.3%      11.4%            6.5%     11.8%

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 $1.5 million in the third quarter
and $4.4 million year to date  compared to the same periods in 1996.  The growth
in revenues was  primarily due to increases  generated by HSBRT.  The decline in
operating gain from the previous  periods reflects slower growth in the domestic
book and Far East  operations,  and  operating  costs  incurred  to develop  new
products and in new start up operations.


                                       16
<PAGE>





Investment Operations
---------------------

                                      Quarter Ended       Nine Months Ended
                                      September 30           September 30
                                      -------------       ----------------

                                     1997      1996       1997      1996
                                     ----      ----       ----      ----

Net investment income               $ 9.1     $ 7.6     $ 25.8     $ 23.5
Realized investment gains             2.3       2.5        6.2        8.5
                                     ----      ----       ----      -----
Pretax income from
  investment operations             $11.4     $10.1     $ 32.0     $ 32.0
                                     ====      ====       ====      =====

Net  investment  income for the third  quarter and year to date  increased  $1.5
million and $2.3 million compared to the same periods in 1996. Investable assets
increased in 1997 in  comparison  to the same period in 1996,  and in particular
during the third quarter,  as the Company invested the proceeds from its Capital
Securities offering. Net investment income was impacted earlier in 1997 by calls
of high yielding preferred stocks and cash collections from reinsurers that were
not received until late in March. Net investment income increases also reflected
more  investable  funds and a modest change in the mix of the portfolio from tax
preferred  investments to more taxable  investments  with higher pre-tax yields.
Higher   interest  costs  related  to  a  larger  amount  of  commercial   paper
outstanding.

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.

In the fourth quarter of 1996, HSB entered into three zero cost collar contracts
to mitigate the effects of market risk on its domestic  common stock  portfolio.
The contracts  have  maturity  dates ranging from November 1997 to January 1998.
The contracts,  which were entered into when the S&P index was 744.3,  allow the
Company to recover from the counterparty if the index is below 695.2 at the time
of maturity and requires the Company to reimburse the  counterparty if the index
is above a range of 811.3 to  818.7  at the time of  maturity.  In  addition  to
offering  downside  protection for market declines in excess of  approximately 6
percent,  the collar  permits the Company to receive the dividends on its common
stock investments and retain a certain level of upside appreciation depending on
market movements.

At September 30, 1997 the S&P index was at 947.28 which is outside the bounds of
the collar.  Although  there would have been a settlement  of $26.5  million had
these contracts matured at September 30, 1997, HSB has adjusted its value of the
contracts  to an  estimated  fair  value  at  that

                                       17
<PAGE>

date and reduced  realized  investment  gains by $29.5 million on a year to date
basis. The impact on the quarter was $10.1 million.

The Company's U.S.  common stock portfolio has experienced a total return of $46
million (which includes price  appreciation of approximately  $41 million) since
December 31, 1996,  and has had a price  movement  correlation  with the S&P 500
Index well in excess of 80%.

As  previously  discussed,  due to the  recent  fluctuations  of  currencies  in
southeast  Asia,  realized  investment  gains were reduced by  approximately  $4
million  during the quarter and year to date,  although there have been no sales
of investments in Malaysian currencies.

Liquidity and Capital Resources
-------------------------------
                                                 Balances at
                                     September 30          December 31
                                     ------------          -----------
                                        1997                  1996
                                        ----                  ----

Total assets                         $ 1,256.7             $ 1,116.3
Short-term investments                   133.3                  97.9
Cash                                       6.6                   4.5
Short-term borrowings                     18.0                   3.2
Capital securities                       108.9                    -
Convertible Redeemable Preferred Stock    20.0                  20.0
Common shareholder's equity              320.5                 345.6

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.  The Company also  maintains a highly liquid
short-term portfolio to provide for immediate cash needs and, since the issuance
of the Capital  Securities  which are  discussed  below,  to offset a portion of
interest rate risk relating to such securities.

On July 10, 1997, HSB Group, Inc.  announced the sale of $110 million of 30 year
Capital Securities in a private  placement.  The securities are non-callable for
ten years and may be called  earlier  upon the  occurrence  of a tax event.  The
securities were issued through HSB Capital I, a Delaware  business trust created
by HSB Group,  Inc. at a floating rate tied to 90 day LIBOR.  The initial coupon
is 6.7 percent.  Holders of the Capital  Securities  will be entitled to receive
preferential  cumulative  cash  distributions  accumulating  from  the  date  of
original issuance and payable quarterly in arrears. The Company has the right to
defer  payment  of  interest  at any time or from time to time for a period  not
exceeding 20 consecutive quarterly periods with respect to each deferral period.
During an extension  period,  interest will continue to accrue and the amount of
distributions  to which  holders of the Capital  Securities  are  entitled  will
accumulate, and the Company will be prohibited from paying any cash dividends on
its common stock. The Company has irrevocably and unconditionally guaranteed all
of the Issuer Trust's obligations

                                       18
<PAGE>

under the  Capital  Securities.  The Company is using the  proceeds  for general
corporate  purposes,  which include the repurchase of HSB common stock;  funding
investments in, or extensions of credit to, subsidiaries;  repayment of maturing
debt;  and  financing   possible  future   acquisitions.   Pursuant  to  certain
registration  rights  contained in the agreement with the initial  purchasers of
the  Capital  Securities,  the Company has filed a  registration  statement  for
capital  securities with virtually  identical terms which holders can receive in
exchange for the original securities.

Cash provided from operations was $19.8 million in the first nine months of 1997
compared to $68.9 million for the same period in 1996. Insurance operations cash
flow (excluding  IRI) decreased as claims paid increased 41 percent  compared to
the same period in 1996,  and premiums  collected  were 2 percent higher year to
date.  Collections from reinsurers increased  significantly in the current year.
The  Company's  participation  in IRI impacted  components  of the  Consolidated
Statement of Cash Flows for 1997,  including a year to date  positive  impact of
$3.7 million and $4.1 million for 1997 and 1996, respectively,  to cash provided
from operations.

Capital  resources  consist  of  shareholders'  equity,  convertible  redeemable
preferred  stock,  capital  securities and debt  outstanding and represent those
funds  deployed or  available  to be deployed  to support  business  operations.
Common shareholders' equity of $320.5 million at September 30, 1997 decreased by
$25.1 million since December 31, 1996. The decrease reflects net income of $47.4
million year to date and an increase in unrealized  gains,  net of tax, of $10.6
million, offset by dividends of $35.1 million and share repurchases.  On October
29, 1997, the sole holder of convertible  redeemable  preferred  stock converted
into 398,406 shares of common stock.

On January 27, 1997 the Board of Directors  renewed the Company's  authorization
to repurchase up to one million of its common shares.  At its July meeting,  the
HSB Board of Directors  increased the  authorization to repurchase shares to two
million. Through September 30, 1997, the Company has purchased approximately one
million shares at a cost of $52.4 million.  Treasury stock of $107.2 million was
reclassified to retained earnings and additional  paid-in capital during 1997 to
reflect the elimination of the concept of treasury shares in accordance with the
Connecticut Business Corporation Act which became effective January 1, 1997. For
comparative  purposes treasury stock of $59.5 million was likewise  reclassified
at December 1996.

At September  30, 1997,  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 September 30, 1997
and  December 31, 1996 was $18.0  million and $3.2  million,  respectively.  The
Company has  authorized a guaranty of up to 40 percent of Radian  International,
LLC's $40 million credit  facility with The Dow Chemical  Company.  At September
30, 1997 the amount  guaranteed was $12.8 million.  Such guaranty will terminate
upon the sale of the Company's interest in Radian International LLC to Dow.

The Company is involved in three 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

                                       19
<PAGE>

believes the  Company's  policies do not provide  coverage for losses  resulting
from the  explosion  events  that are the  subject  of these  proceedings.  More
information  pertaining to these legal  proceedings may be found under note 7 of
the Notes to Consolidated Financial Statements herein.

In 1996 the Company began a  comprehensive  effort to assess and address  issues
relating to the ability of its policy processing and other  operational  systems
to properly  recognize  calendar dates  beginning in the year 2000. The analysis
indicated roughly 30% of existing code is compliant,  roughly 60% is represented
by aging legacy  systems  which are  scheduled to be replaced  before the end of
1998 due to current business needs, and the remainder will be addressed  through
modification  to  compliant  code or  discontinuation.  The  impact of year 2000
expenditures  on a stand alone  basis is not  clearly  evident as the Company is
replacing  legacy   applications  due  to  changing   business  needs  and  such
replacement applications will be year 2000 compliant.  However, the overall cost
of modification  efforts and application  replacement which include  substantial
enhancements  to business  functionality,  has been estimated at $13-$20 million
over a three year period.  Certain of the application  replacement costs will be
capitalized consistent with the Company's existing capitalization policy.

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 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
--------------------------

The Company is involved in three 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.

                                       20
<PAGE>

A lower court ruling in one of these cases held that an explosion did occur, and
that the  Company was not liable for losses of the  insured  resulting  from the
explosion.  In a further  action,  the court  denied  the  Company's  motion for
summary judgment on certain issues,  thus leaving the Company potentially liable
for certain unquantified losses resulting from events prior to the explosion. In
the first quarter of 1997 the Company and the property  insurer  jointly settled
the case with the insured.  The Company's  ultimate share of the settlement will
be  determined  in an  arbitration  proceeding  with the property  insurer.  The
Company has incurred  gross losses and LAE of $40.7 million and a net loss after
taking  into  account  reinsurance  recoverables  of $6.5  million,  of which $5
million  represents  claim cost and the remaining $1.5 million  represents  loss
adjustment expenses. As a result of payments made to date, at September 30, 1997
the Company carried gross loss and LAE reserves of $2.8 million and recoverables
from reinsurers of $2.9 million.

The Company has accrued  $6.5  million  with  respect to the other two cases for
potential  loss  adjustment  expenses,  including  legal  costs  to  defend  the
Company'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 the Company is held liable for one or both of the  remaining  claims,
amounts in excess of the  Company's  net  maximum  aggregate  retention  of $8.5
million is recoverable from the Company's 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 the Company'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.  The Company's  reinsurance
contracts do not require the Company to reimburse its  reinsurers for any losses
such  reinsurers  might incur should these cases not be decided in the Company's
favor.  Nevertheless,  reinsurers  often quote rates for future  coverages based
upon their or other reinsurer's  experience on a particular account.  Therefore,
in the event the  Company's  reinsurers  pay  significant  sums  pursuant to the
arbitration  or  litigation  proceedings  described  above,  it  is  likely  the
Company's reinsurance rates would increase in future periods. However, given the
insured capacity that exists in reinsurance markets worldwide,  coupled with the
Company's  ability to negotiate a redesign or  restructuring  of its reinsurance
program, it does not necessarily mean that such an increase would be material.

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.


                                       21
<PAGE>


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 filed on July 10,  1997  announcing  the sale of $110
                  million of 30-year Floating Rate Capital  Securities issued by
                  HSB Capital I, a Delaware  statutory business trust created by
                  HSB Group, Inc.

                  Form  8-K  filed  July  28,  1997  announcing  second  quarter
                  results, an increase in the share repurchase authorization and
                  the October dividend.


                                       22
<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:  November 7, 1997           By:      /s/ Saul L. Basch
                                  Saul L. Basch
                                  Senior Vice President, Treasurer
                                  and Chief Financial Officer

Date:  November 7, 1997           By:      /s/ Robert C. Walker
                                  Robert C. Walker
                                  Senior Vice President and
                                  General Counsel




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