After taking the single largest stake in the insurance conglomerate with an over 8% holding, Paulson is now out with a plan to split the company's property and casual business in a tax free spinoff after agitating for change earlier in February on the company's fourth quarter earnings call. For Hartford Financial Services and Paulson, the company's largest shareholder, a spin may provide relief from a disastrous 2011.
|John Paulson's flagship hedge fund was reportedly down 51% in 2011|
"As the largest investor in the Company for the past year, we have done exhaustive research on the challenges and opportunities of The Hartford and believe that a spinoff would produce an increase in value for Hartford shareholders of 40 -- 60%+ above the unaffected share price," wrote Paulson in a letter to Hartford Financial Services Chief Executive Liam McGee that was released on Tuesday.>>View John Paulson's Portfolio Overall 2011 was a brutal year for Paulson and Hartford Financial Services. The insurance company's stock fell nearly 40% on waning profitability and a drop in revenue. The company's net income fell over 60%, while sales fell over 2%. For Paulson, 2011 was even more missable. His flagship Advantage fund dropped 51% in 2011, according to Bloomberg reports after a bet on financials panned. By comparison, Paulson's Advantage Plus fund jumped 164% in 2007 on a timely mortgage short. Paulson's three largest holdings tied to Gold, however he also has $1 billion dollar stakes in Delphi Automotive (DLPH), Anadarko Petroleum (APC) and Capital One (COF), according to filings with the Securities and Exchange Commission compiled by Bloomberg. Overall Hartford Financial is Paulson's ninth largest holding with Citigroup (C), Transocean (RIG) and Wells Fargo (WFC) also among his top 10. The hedge fund investor with a merger arbitrage pedigree is pushing for a tax-free spinoff first floated in November 2011 because he sees that investors give Hartford a significant discount relative to its industry peers. "As part of our analysis, we considered all other strategic alternatives including share buybacks, the sales of individual businesses, the sale or IPO of minority stakes in Life and/or P&C, and others, but none of these came close to the dramatic increase in shareholder value to be created by a spinoff," wrote Paulson.
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