results.

Bermuda-based ACE Ltd. is continuing to reduce its exposure in the excess liability market, chairman, president and CEO, Brian Duperreault has told shareholders by letter.

Mr. Duperreault was commenting after a highly successful third quarter and, after shareholders' equity had increased $169 million to nearly $2.5 billion for the nine months to June 30.

Total assets neared $4.9 billion as total loss reserves exceeded $1.9 billion.

Mr. Duperreault also noted that directors and officers (D&O) and excess liability still maintained a 90 percent client retention rate.

He said: "Satellite results reflected a busy launch schedule and some partial losses related to initial operations for two satellites.

"ACE increased limits for aviation coverage, from $100 million to $150 million, in response to demands from the larger aviation insurance buyers.

However, through the use of reinsurance, we have not increased our $50 million net retention.

"Excess property, a line that focuses on heavily engineered risks, continues to provide excellent cross-selling opportunities.

"The growth in premium from new business and renewal programmes contributed to an excellent quarter for financial lines.

"Political risk coverage, offered through Sovereign Risk, is our newest line of business. We are receiving submissions and anticipate recording premiums for this line in the fourth quarter.'' The reduction in overall exposure comes as average attachment points increased and average limits purchased decreased.

The third quarter results were the first opportunity for ACE to reflect underwriting results for the 1997 year of account for their Lloyd's operations, with results reported one quarter in arrears.

ACE has capacity of 142 million ($226 million) and net premiums are expected to remain at roughly half that capacity.

The company acquired an additional 10 million of capacity when Lloyd's held its first auction for the 1998 year, and intends to participate in future rounds to obtain further capacity.

The Lloyd's operations are soon to be relocated to enable all of ACE's managing agencies and their support services to be positioned together.

Mr. Duperreault said the company's property catastrophe reinsurer, Tempest, posted excellent financial results with virtually no losses for the quarter.

He said: "It was a difficult renewal period as prices continued to decline.

Some policies were not renewed but volume was maintained by writing several custom-tailored programmes.

"For the first time, at June 30, 1997, Tempest purchased a modest amount of retrocessional coverage from triple A rated carriers at prices we deemed reasonable.'' In total, ACE wrote net premiums of $195.5 million for the quarter and $494.7 million for nine months, as opposed to $165.1 million and $471.5 million, respectively for the comparative periods in 1996.

Net premiums earned rose from $145.9 million (third quarter) and $408.3 million (three quarters) to $163.6 million and $486.7 million, respectively.

Net investment income improved from $50.6 million to $59.6 million for the third quarter and from $146.1 million to $177.4 million for the nine months.

Effective June 30, the quarterly dividend was increased from 18 to 22 cents per share. And during the quarter, the company purchased 1,527,000 shares at a total cost of $93 million. At June 30, $268 million had not been utilised out of $300 million authorised in May for share repurchase.

Total market appreciation on the firm's investment portfolio during the quarter amounted to $190 million, $46 million of which was recognised as realised gains on the portfolio, and $144 million of which was recorded as an increase in unrealised appreciation in the shareholders' equity.

Mr. Duperreault added: "The benefits of our diversification strategy and the contributions of (ACE subsidiaries) ACE Insurance, Tempest and Lloyd's are clear in our excellent results.

"ACE has demonstrated a 26 percent rise in gross premiums written (to $223.4 million for the quarter) and an 18 percent increase in net premiums written (to $195.5 million for the quarter) while increasing our purchases of reinsurance and retrocessional coverages.

"Clearly our diversification strategy has enabled ACE to be a strong competitor in a difficult property and casualty insurance marketplace.'' ACE RESULTS -- Brain Duperreault