When you're hedge fund manager who not too long go scored returns of 590 percent and a personal payday of $3.5 billion in a single year, losing 50 percent while being forced to live off management fees can take a toll on the ego. You start questioning every move. You become plagued by self-doubt. You stop posing for photoshoots with your eyes closed and your collar up. You probably even remain silent during earnings calls, no matter how big your position in the company, for fear of people snickering and asking each other "Why is he still here?" or whispering "Two words: fake trees." It's a dark, deeply depressing time, one that you wouldn't wish on your worst enemies. Then you return 5 percent in a single month and BOOM! It is GAME ON. John Paulson, who seems to have regained his sea legs in time for a Q&A with Hartford Financial CEO Liam McGee this morning, knows what we're talking about.
The short version (with regard to McGee's apparent inability to give Paulson an answer as to what, exactly, he intends to do about the company's stock slide): "What are you going to do about it? What are you going to do about it, asshole? You're fucking shit. Where did you learn your trade, you stupid fucking cunt, you idiot? Who ever told you that you could work with men? Oh, I'm gonna have your job, shithead." The slightly longer version:
Your next question comes from the line of Marin Farley [ph] with Paulson and Company.
Q: Good morning. This is John Paulson [ph] speaking.
A: Hello, John.
Q: Liam, I want to go back to the Slide 17 talking about the potential separating the Life and P&C business. And the – I know you're doing a strategic review but there's no slide talking what about what the potential would be just that there's challenges. So Goldman Sachs came out with I think a very good analysis a few months ago where they showed this – they estimate the upside to doing a tax free spin off of P&C could be over 70% of what the current stock price is trading at. Now, I agree that there's going be challenges but isn't your job to really overcome those challenges to achieve the maximum value for shareholders? Now, 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. Last year Hartford stock was down 38% while the P&C stocks were up 14% and even declined much more than the Life index which was down 21%. So what I'd like to see you do is not merely come back and saying yes, we're looking at strategic options but there's challenges to achieving them but what – first of all, do you agree that you could create as much as 70% value for your shareholders by spinning off – separating P&C? And secondly, is [indiscernible] incentive to overcome the challenges that it's going to take to spin this off and how long do we have to wait to hear if there's going be a positive recommendation to separate these two businesses?
A - Liam E. McGee: Thanks John for the question. First of all, the analysis and the intent of the comments was to acknowledge that the challenges are significant not to say that they could not be overcome. Second of all, our analysis including the frictional cost if you will that are then third category would suggest that a split would not create the kind of shareholder value that that particular report suggested. And third, in addition I think your sense of urgency about
realizing greater value for shareholders is shared by me and by this team. And so I hope I answered your questions distinctly and correctly...
Q: Partially, Liam, but if you share the interest all shareholders have in increasing shareholder value I'm surprised that as part of the discussion you don't talk about how much value could be created by separating the P&C business from the Life business. And not the only slide you devote to it talking about that there's some obstacles to overcome and not talking about the upside in weighing the upside other separation against what the obstacles are.
Q: And better yet not just listing those obstacles but what I'd like to see is how you will overcome those obstacles to result in a more fair valuation for Hartford. Not that there's obstacles but how you're going to overcome the obstacles? That's what I as a shareholder look for you as the management to do.
A: Thank you, John. And I – that is our mindset. Our purpose in the slide was to identify the hurdles. You can – if you heard our language we did not say they were not surmountable, number one. We said there were significant costs to surmount them in a number of areas, so we felt we owed shareholders that disclosure. Number two, we do not believe that splitting them in the current environment for the reasons that we cited will create shareholder value. And third, again I'll reiterate, we have an incredible sense of urgency on looking at all ideas to create shareholder value.
Q: Well, I think you need to do a much better job of explaining that because Goldman's report is a very good report at a path to separate the business and create what they estimate as a 70% increase in shareholder value. And then you merely say there's some obstacles and you don't equate what the costs are to the benefit and what value do you think could be created. Because right now with the stock performing as poorly as it has relative to both P&C and life companies, I think you need a better explanation of what you're going to do to enhance shareholder value. Merely that you're working hard and you're committed but there's obstacles. What we need you to do is overcome the obstacles to enhance the valuation for your shareholders. Not merely point out that there's obstacles.
A: Okay, John. Thank you. I hear you loud and clear.
Q: I hope so.
Warning to the managements of Paulson's current holdings- there's a new JP in town, one who will no longer meekly stand by and accept subpar performance from you. God help you if you badly miss earnings estimates; if your margins narrowed in every goddamn segment; if you had to re-state past earnings (downward); if you disclose for the first time on your call that you're 100% hedged on natural gas at $8. If you dare to dismiss speculation about how much value breaking up your company would produce for shareholders with nebulous comments about "obstacles"? Run and hide.