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Derivatives

ACE Wields The Axe In Pre-IPO Clean Up

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ACE has slashed around one-third of its staff at ACE Guaranty Corp. and ACE Capital Re and exited several businesses to prepare its capital markets subsidiaries for an initial public offering lined up for next quarter.

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ACE has slashed around one-third of its staff at ACE Guaranty Corp. and ACE Capital Re and exited several businesses to prepare its capital markets subsidiaries for an initial public offering lined up for next quarter. The monoline has stopped writing protection on the equity and mezzanine layer of credit derivatives and total-rate-of-return swaps written on portfolios of primarily investment grade corporate credits and highly rated classes of structured securities, according to the firm's S-1 filing. It has also exited trade credit reinsurance, title reinsurance, life, accident and health reinsurance and auto residual value reinsurance.

Michael Schozer, president of AGC in New York, confirmed there have been some layoffs, but declined to comment further than the S-1. Schozer joined ACE in December from Ambac Financial Group, where he was a managing director and head of structured finance and credit derivatives (DW, 1/15). The move out of these businesses puts the company more in line with other triple A monolines, according to credit pros. "The philosophy of a triple A is leverage with very few claims or losses," said one market official, adding that writing protection on CDO equity does not fit that remit.

The layoffs started in November after ACE Capital announced its intention to share resources with AGC to reduce both firms' administrative and underwriting expenses (DW, 11/24). The latest round, however, is by far the most extensive, with some 35 staffers understood to have been made redundant, according to officials.

Terry Campbell, senior v.p. in asset-backed securities, Winston Wohr, chief risk officer, Bob Coors, v.p. in credit derivatives and Andrew Stein, v.p. in ABS, are among the most senior officials to have been cut. James Burke, who joined from Salomon Smith Barney last year to build a guaranteed investment contract (GIC) businesses, was also let go. The plan to develop a GIC business, which comprises investment contracts in which the insurer guarantees both principal and interest on a pension contribution, has been canned. None of the officials responded to messages left on their work voicemails. Barbara van Hassel, spokeswoman in New York, did not return calls.

Although most of the cuts came in areas the firm is closing, there were also some in businesses it plans to keep, such as mortgage-backed securities and risk management. One official said this shows the monoline used the round of cuts to streamline all its divisions.

 

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