Imagine the surprise Liam McGree, CEO of Connecticut insurance firm The Hartford, had this morning when John Paulson decided to take the place of his analyst and to give the executive a piece of his mind on the company’s Q4 earnings call.
Paulson & Co. is a majority shareholder at The Hartford, owning about 9 per cent of the company. So it doesn’t help that like Paulson, Hartford did not have a happy 2011—the company’s stock declined over 39 per cent last year.
Judging from the ranting tirade that followed when Paulson took the line, the hedge funder is definitely not happy with The Hartford’s performance. For about five minutes, Paulson yelled at McGee, suggesting the company spin off parts of its business and asked McGee how The Hartford plans to overcome the obstacles it is facing and increase shareholder value.
At one instance, Paulson pointed out that Goldman Sachs has been putting out reports on the company with suggestions that sound much better than the way The Hartford is currently operating.
Here are some biting excerpts we picked out:
“I agree there could be challenges but isn’t your job to over come those challenges to achieve the maximum value for shareholders? I would say that Hartford needs to do something drastic because the stock is the lowest valuation relative to book value of any major insurance company.”
“What I’d like to see you do is not merely come back and say ‘Yes, we’re looking at strategic options but there’s challenges to achieving them.'”
“Better yet, not just listing those obstacles but I’d like to see how you will overcome those obstacles to result in a more fair valuation for Hartford… not that there’s obstacles but how are you going to overcome those obstacles. That’s what I as a shareholder look from you as the management to do.”
“I think you need to a much better job of explaining that, because Goldman’s report is a very good report on a path to separate the business and create what they estimate is a 70% increase in shareholder value. You merely say there’s obstacles and you don’t equate what the costs are to the benefit and what value you think could be created.”
When Paulson finished, McGee replied with, “Thank you, I hear you loud and clear.”
Even though Paulson may have shredded McGee to pieces on the phone, it has helped The Harford today and resulted in some of that increased share value Paulson kept asking for. The stock is up nearly 8 per cent today following the earnings call.
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