Hartford Financial Services Group Inc. warrants climbed to twice the price they sold for in a U.S. Treasury Department auction three years ago, benefiting investors such as Bruce Berkowitz and John Paulson.

The warrants, which expire in June 2019, advanced 1.6 percent to $27.40 at 12:17 p.m. in New York, compared with the $13.70 price in a September 2010 auction. Each contract allows an investor to buy 1.03 shares for $9.53. The company is trading at $36.03 after changing hands for less than $4 in 2009.

Berkowitz, Paulson and David Tepper are among money managers who used the contracts to bet on an economic recovery and the insurer’s prospects as a simpler company than the one that needed a U.S. bailout in June 2009. Chief Executive Officer Liam McGee, who was hired later that year, has focused on property-casualty coverage, retreating from life insurance and savings products that soured in the crisis.

“They began to streamline operations and basically cut risk,” Gloria Vogel, an analyst at Drexel Hamilton LLC, said by phone. “They transformed it from this large global, multinational, multiline company, to a company that is much more focused on growing their core strengths.”

Appaloosa Management LP, the hedge fund run by Tepper, has owned Hartford warrants since late 2010 and reported having 1.28 million as of Sept. 30, according to data compiled by Bloomberg. Bruce Berkowitz’s Fairholme Capital Management LLC had 553,900 and Paulson & Co. owned about 3.3 million.

Paulson, who bet against mortgage bonds before the financial crisis, pushed McGee to split up the Hartford, Connecticut-based insurer, a plan the CEO resisted. Paulson has a common equity stake of about 1.3 percent and was once Hartford’s largest holder with more than 8 percent. In April, Paulson’s firm praised Hartford for performance “ahead of their own plan and our expectations.”

Berkowitz’s Projection

McGee divested retirement and life units and has cut liabilities on annuities that the company issued in prior years by using hedges and paying customers to surrender the retirement contracts. Hartford shares have gained 61 percent this year, after a 38 percent rally in 2012. They’re still 61 percent below the level at the end of 2006.

Fairholme’s return on the Hartford warrants may be 750 percent, Berkowitz estimated in a 2012 letter, based on assumptions including a 10 percent annual improvement in book value, a measure of assets minus liabilities.

The contracts initially let holders buy Hartford shares for $9.79. The exercise price and number of shares per warrant are adjusted when the insurer pays dividends.

Dividend, Buybacks

Hartford boosted its quarterly payout by 50 percent to 15 cents a share in June and lifted its buyback authorization by $750 million to $1.25 billion. The company has also repurchased warrants, leaving 47.5 million outstanding as of Sept. 30.

The Treasury demanded warrants from companies that received rescue funds in the Troubled Asset Relief Program as compensation for the risks the U.S. was taking with taxpayer dollars. The sale of 52.1 million Hartford warrants raised $706.3 million.

Hartford got the second-biggest aid package among U.S. insurers, trailing American International Group Inc., whose bailout swelled to $182.3 billion. Lincoln National Corp. also took U.S. funds that it later repaid. McGee paid back its $3.4 billion in U.S. aid in March 2010, after raising cash by selling shares and debt to private investors.

The insurer received the funds in 2009, after the financial crisis pushed down the value of Hartford’s fixed-income holdings, while the stock slump increased liabilities on equity- linked retirement products.

–Editors: Dan Kraut, Dan Reichl