Largest Shareholder Presses The Hartford to Decide Soon on Split-Up

By | March 9, 2012

Hedge fund manager John Paulson said Hartford Financial Services Group Inc. could boost its share price by 62 percent if it listened to his advice to break up the insurance provider as early as April.

The billionaire, whose Paulson & Co. is Hartford’s biggest shareholder with an 8.51 percent stake, has been urging the insurer to spin off its property and casualty unit.

“No one is saying do a spin-off today. We are saying announce a spin-off today and then take the next five to six quarters to close,” Paulson said in a presentation filed on Friday with the U.S. Securities and Exchange Commission.

“A spinoff of P&C would unlock significant value,” Paulson said in the 24-page presentation aimed at Hartford and its investors. “We believe the combined value would be approximately $31, a 62 percent increase.”

Hartford shares closed at $20.07, up 0.75 percent, on the New York Stock Exchange. The stock has tumbled 30 percent over the past year.

Hartford responded by reiterating that it recognizes potential benefits to a separation of the property and casualty and life companies, including those outlined by Paulson.

By putting a date and a number behind his requests for a split-up, Paulson on Friday added more punch to his increasingly vocal demands that the company take dramatic action to revive its flagging share price.

By flexing his muscle, Paulson joins a growing number of hedge fund managers playing a more activist role in calling for change at companies ranging from Yahoo Inc to Canadian Pacific Railway Ltd.

His biggest portfolio, the Advantage Plus fund, lost more than 50 percent in 2011 as his largest bets, including Hartford, sagged. Paulson oversees roughly $23 billion in assets.

Paulson, who cemented his credentials as one of the industry’s most watched hedge fund managers with savvy bets against the subprime mortgage industry and on gold, has become increasingly public in calling for change at Hartford.

On a conference call in early February, the normally cool fund manager became so agitated when asking about future plans that he ended up shouting at Hartford Chief Executive Officer Liam McGee.

On Friday Paulson tweaked the formal proposal for a breakup that he made on Feb. 14 with the new numbers and plenty of charts and comparisons.

Behind the scenes, Paulson also has met with other investors, urging them to speak up, too.

The presentation is part of what Paulson & Co. is using in its “continuing discussions or communications with (Hartford’s) management, board of directors and shareholders, and public statements,” the hedge fund said in the filing.

As part of the plan, Paulson said Hartford could shut down its variable-annuity operations to save cash and then review the strategy and structure of its life business over the next 12 months.

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