Diversification and flexibility was the secret to ACE's successful set of third quarter results, including a $78 million rise in profits, according to chairman and CEO Evan Greenberg.

Speaking on conference call, Mr. Greenberg said the Bermuda-based insurance/reinsurance giant's focus on increasing its capital helped it to produce a net income rise of 13 percent from $578 million to $656 million, on the day when rival and neighbour XL Capital suffered a 13 percent profit loss.

And he reckons the company must stick to that same winning formula in order to grow the business in the future.

"We have a strategy and I think you have to view your capital in terms of your strategy," he said.

"We have capital flexibility to execute our strategy and our strategy does call for diversification, either it is going to be done organically or through acquisition or a combination of both over a medium and longer term period, we don't simply view the short term, and that is our plan to continue to enhance our franchise, we'll do that kind of diversification both as geographically and as line of business-oriented."

Mr. Greenberg said his company had enjoyed an "excellent" third quarter, pointing to strong earnings across the board, with after-tax operating income and net income up six percent and 13 percent respectively.

"Over prior year's third quarter, which as you will recall was an outstanding quarter, our combined ratio was 88.5 and book value increased by $851 million," he said.

"Modest catastrophe losses in the period contributed to the favourable results and we also had $70 million of pre-tax benefits for the prior period development.

"Adjusting for the favourable impact of the light cats in the prior period, we produced a combined ratio of about 90 percent, a very good result."

But he said the real success story was reflected in the nine-month results.

"Looking back on the year so far, I believe our nine-month numbers tell an excellent story about ACE's performance across the board," he said.

"To date, book value has increased by nearly $2 billion or 12 percent, our return on equity for the year so far is over 18 percent, nine-month operating income is up 18 percent over the prior year with strong contributions in both underwriting income and investment income and year to date operating cash flow is almost $4 billion, adding to our invested asset, which now stands at $42 billion.

"Expense discipline has been excellent across the organisation, resulting in a nine-month expense ratio that is below the prior year."

And Mr. Greenberg said, considering the soft market conditions, ACE's returns were good.

"Our loss ratio year to date is up about one point, this year we have taken approximately $128 million in positive pre-tax prior period development, over three-fourths of which is from short tail lines, on the other hand, our cat losses have been approximately $125 million greater than in the same nine-month period last year, so that one point year to date increase is truly an accident year increase and reflective of market conditions," he said.

"Speaking of the market, the market is soft and softening conditions are a reality around the world, reflecting these conditions, revenue growth in the quarter was essentially flat to down, some areas growing, with others shrinking, in line with our underwriting discipline, our insurance business grew roughly two percent in the period, while reinsurance shrank by 24 percent."