Billionaire John Paulson cut his hedge fund’s stake in Hartford (HIG:US) Financial Services Group Inc. after efforts to pressure the insurer to sell businesses failed to lift the shares above his purchase price
Paulson & Co. held 19.5 million Hartford shares at the end of the third quarter, down from 31.3 million shares three months earlier, according to a filing today with the U.S. Securities and Exchange Commission. Hartford, based in the Connecticut city of the same name, closed the period at $19.44, compared with $19.12 on Feb. 7, the day before Paulson urged Hartford to “do something drastic” to boost the stock price.
Hartford Chief Executive Officer Liam McGee has focused the firm on property-casualty coverage, striking deals to sell the individual life insurance unit, Woodbury Financial Services, retirement-plan operations and the individual annuities- distribution business. The company is still working to limit liabilities from variable annuities. Paulson’s plan was for Hartford to split into property-casualty and life insurers.
“We were disappointed that management, on the Feb. 8 earnings call, only addressed the potential ‘challenges’ of a separation,” New York-based Paulson & Co. said in a Feb. 14 regulatory filing. “We believe that you underestimate the potential value that would be created by a spin.”
McGee is working to revive Hartford after losses on equity- linked variable annuities led to a bailout in 2009 that was subsequently repaid. The shares advanced 24 percent this year to close yesterday at $20.23, after losing 39 percent in 2011.
“Hartford is taking the necessary actions, as outlined in March, to position the company for higher returns on equity, reduced sensitivity to capital markets, a lower cost of capital and increased financial flexibility,” McGee said in a September statement.
Paulson’s stake at the end of the third quarter was about 4.5 percent and he was no longer the largest Hartford shareholder, according to data compiled by Bloomberg. The stake was 8.5 percent, according to a filing in May in which Paulson said shares were no longer held for the purpose of influencing control of the company.
Paulson’s firm spent about $927.8 million for an 8.4 percent stake in Hartford, according to the February filing, meaning shares purchased through then cost an average of about $24.71, data compiled by Bloomberg show. The insurer traded for as little as $15.65 and as high as $20.69 in the third quarter.
The New York-based hedge fund also pared its investment in Gold Fields Ltd. (GFI) in the third quarter, selling 11.5 million American depository receipts, according to the filing. Paulson now holds 6.5 million ADRs valued at $84 million.
Paulson, 56, lost 17 percent this year through October in his Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns. Slumping gold-mining stocks have contributed to his declines this year.
ADRs of Gold Fields, the fourth-largest producer of the precious metal, have declined 22 percent this year. Standard & Poor’s downgraded the company’s bonds to below investment grade today.
Paulson also sold its entire stake in New York-based JPMorgan Chase & Co. (JPM:US), which was valued at $142.9 million. The hedge fund sold all of its 2.7 million shares of Baxter International Inc. (BAX:US)
Paulson added 8.5 million shares in Life Technologies Corp. (LIFE:US), bringing his holding to 13.5 million shares valued at $436.3 million. The Carlsbad, California-based company that sequences genetics for medical purposes is now the hedge fund’s fourth-biggest U.S. stock investment by market value.
The securities reported in Paulson’s Form 13F had a total market value of $12.7 billion as of Sept. 30, the filing shows. That was up from $12 billion as of June 30.
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