(Reuters)—Shares of insurer Hartford Financial Services Group Inc. soared on Wednesday after the company said it had considered the possibility of a breakup and its largest shareholder pushed it to be more aggressive on that front, saying "drastic" action was needed.

Shares were up 7.5% at $20.56 in midmorning trading. With those gains the stock is up more than 26% for the year, against gains of just under 9% for the broader S&P insurance index.

Even so, the company trades at a ratio of 0.43 times its book value, according to Thomson Reuters data, less than half of the sector median of 0.90 times book (which itself is a depressed figure by historical standards).

On Tuesday, Hartford reported a profit that beat expectations, even though earnings were actually down sharply and the company had to take a series of charges to boost its reserves. Many of the company's peers are still reducing reserves, to the benefit of their bottom line, rather than increasing them.

Wednesday, on a conference call with analysts, Hartford Chief Executive Liam McGee said the company had looked at the possibility of splitting itself into life insurance and property insurance businesses, but found "there are significant challenges to making a split possible."

McGee, a former Bank of America executive who became CEO during the financial crisis—when it was one of three insurers to receive a government bailout—has said before that it was hard to make a case for a split.

But McGee was pressed on the point by hedge fund heavyweight John Paulson, whose Paulson & Co. is the company's largest shareholder, with an 8.7% stake.

"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," Paulson said, his agitation clearly rising as he asked repeatedly how much longer shareholders would have to wait to hear definitely whether the company might pursue a split.

He also insisted management needed to present a "better explanation" of what it was doing.

Paulson is not the first high-profile fund manager to push an insurer for improved performance in the recent past. In late 2010, Steve Eisman threatened the management of Hartford peer Genworth Financial on a conference call, saying he would launch a proxy fight unless they improved returns.

Eisman never made good on the threat.