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John Paulson Urges Hartford Financial Spin-Off

Tuesday, 14 Feb 2012 | 6:57 PM ET

On Valentine’s Day, John Paulson looked for a breakup — of Hartford Financial.

The renowned hedge fund manager on Tuesday filed a letter to the board of Hartford Financial with the SEC in which he pushed for a spinoff of the 201-year-old insurance company’s property and casualty unit.

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The letter claimed that “a spinoff would produce an increase in value for Hartford shareholders of 40-60%+ above the unaffected share price. This valuation range is also consistent with Goldman Sachs’ estimate of a valuation enhancement on the order of 70%.”

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The spin-off, the letter stated, would:

  • “Create two pure play insurance companies — one in life and one in P&C — whose management is focused solely on each companies’ own strategies, distribution channels and capital requirements.
  • “Enable each of the respective companies to achieve a multiple consistent with its industry, which, for the property casualty business, would mean a multiple of approximately 1.1x book value versus Hartford’s current multiple of 0.4x — the lowest of any major US insurance company.
  • “Reduce complexity, which limits sell-side coverage and investor interest.”

In the 13F filing, Paulson’s Paulson & Co. also disclosed an 8.4 percent stake in Hartford Financial.

Before the letter was made public, Hartford shares closed at $19.81, down 2 percent for the day. It was trading in the $21 range in the after-hours session.

Anthony Scaramucci of SkyBridge Capital sounded optimistic on Paulson’s view.

“John Paulson’s a guy that likes to dig his teeth into things where he’s been wrong in the short term. He was wrong in the short term on the ABS trade in 2007. He seems to have been wrong on Bank of America and the financials last year. But now look at his other hedge fund contemporaries, like Eaton Park, piling into Bank of America,” he said. “So one of the traits that John Paulson has had in his career, he’s a little early and a little ahead of other people, and he’ll probably be right about here.”

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Trader disclosure: On Feb. 14, 2012 , the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova is long VRTS; Terranova is long LQD; Terranova is long SWN; Terranova is long CSCO; Terranova is long TBT; Terranova is long SBUX; Terranova is long FXE; Terranova is long OXY; Terranova is long MCD; Terranova is long JOY; Terranova is long AXP; Terranova is long EMC; Terranova is long IBM; Terranova is long UNG puts; Terranova is short AAPL put spreads; Najarian is long VIX call spreads; Najarian is long RVBD calls; Finerman is long AAPL; Finerman is long BAC; Finerman is long JPM; Finerman is short IBM calls; Finerman is long HPQ; Adami owns C; Adami owns GS; Adami owns MSFT; Adami owns AGU; Adami owns NUE; Adami owns INTC; Adami owns BTU; Scaramucci is long AAPL; Scaramucci is long BAC; Scaramucci is long C; Scaramucci is long GS

For Anthony Scaramucci
SkyBridge Capital Is A Fund Of Funds Manager

Anthony Scaramucci is one of 8 national finance chairs for Mitt Romney campaign

Scaramucci a fundraiser for Mitt Romney and has contributed to the Romney campaign

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No disclosures

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