Murphy played a role in having Paulson & Co. back the idea of breaking up AIG. (Photo: Thinkstock)

(Bloomberg) — Charles Murphy, who helped pick insurance investments for U.S. hedge-fund manager Paulson & Co. and was an architect of the firm’s activist push at American International Group Inc., has died. He was 56.

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“We are extremely saddened by this news,” John Paulson, the company’s billionaire founder, said in a statement Tuesday. “Charles was an extremely gifted and brilliant man, a great partner and a true friend. Our deepest prayers are with his family.”

Murphy plunged to his death from a room in the luxury Sofitel New York Hotel on Monday afternoon, said a person familiar with the matter, who asked not to be identified. A spokesman for the New York Police Department confirmed that a man in his 50s was found dead at the hotel at about 5 p.m. local time on Monday. He said he couldn’t disclose the identity of the man because the family hadn’t yet been informed. The case is still under investigation, he said.

Murphy, who joined Paulson’s firm in 2009, played a key role in developing a stance to break up AIG. Paulson, along with a representative from Carl Icahn’s investment company, last year took seats on the insurer’s board in what analysts had seen as one of the toughest campaigns for the billionaires.

The investors pushed Chief Executive Officer Peter Hancock to shrink the company and boost returns. This month, AIG said Hancock will step down after posting four losses in six quarters. Paulson’s hedge fund has been cutting its stake in AIG, even as the billionaire sat on the board.

Murphy graduated with a B.A. from Columbia University, a law degree from Harvard University and an MBA from the Massachusetts Institute of Technology. He’s survived by his wife, Annabella.

Murphy previously worked at Goldman Sachs Group Inc. in New York and then for Morgan Stanley, Deutsche Bank AG and Credit Suisse Group AG in London. He moved to the U.S. in 2007 and bought a $33 million limestone property on East 67th Street, the highest price on record at that time for an Upper East Side townhouse built on a standard 25-foot-wide lot, the New York Times reported in 2009. He tried to sell the house after losing his job at Fairfield Greenwich Group, a hedge-fund manager that invested money with convicted fraudster Bernard Madoff, the paper said.

CNO role

Before the AIG investment, Murphy worked on profitable bets at Paulson & Co. including the recapitalization of life insurer CNO Financial Group Inc., at which he was a director from 2009 through 2012. “It wasn’t a fast-money play,” CNO CEO Ed Bonach said a year later. “Paulson was an important part of a several-part solution to helping us to navigate through the financial crisis,” with Murphy leading the negotiations.

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Murphy also helped Paulson & Co. invest in Radian Group Inc. as the mortgage guarantor recovered from the housing crisis and the Hartford Financial Services Group Inc. After Paulson urged the insurer to break up into separate companies, Hartford instead opted to sell some units, which helped the shares rebound from a slump.

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