Hartford Bows to Paulson's Pressure to Drop Annuity Business
Billionaire hedge fund manager John Paulson, best known for a prescient bet against subprime mortgages and the financial industry leading up to the 2008 crisis, is taking a page out of Carl Icahn‘s book and proving fairly successful.
Paulson has been pushing Hartford Financial Services (HIG) to focus on its property and casualty insurance business, its “crown jewel” as he put it in a March 9 presentation filed with the SEC urging the company to split itself up.
That presentation came after Paulson took the unusual step of directly questioning management on the company’s quarterly earnings call in February, and now appears to have paid off.
The Hartford announced Wednesday that it will focus on property & casualty, group benefits and mutual funds, while running off its individual annuity business and pursue sales or alternatives for individual life insurance, Woodbury Financial Services and retirement plans.
“The Hartford’s sharper focus will lead to an organization that, over time, will be positioned for higher returns on equity, reduced sensitivity to capital markets, a lower cost of capital and increased financial flexibility,” said Chairman and Chief Executive Liam McGee. “With this portfolio and the actions we are taking, we are on the right path to unlock value and deliver superior, long-term returns for shareholders.”
While Paulson, whose hedge fund firm Paulson & Co. was the company’s largest shareholder with an 8.5% stake at the end of 2011, is not mentioned by name in the press release, his fingerprints are all over the announcement given his conference call comments and subsequent presentation. Even so, a person familiar with the company’s process says the Hartford retained bankers in the summer of 2011 to evaluate alternatives. “Paulson’s surfacing simply added the split to the list of options,” this person says.