HAMILTON, Bermuda (Reuters) - Bermuda insurance group ACE Ltd. reported sharply lower quarterly profits yesterday as it set aside

cash for reserves and suffered higher than usual property claims in Europe.

Net income for the quarter ended December 31 was $46.3 million, or 15 cents per share, down 40 percent from $113.8 million, or 44 cents per share, earned in the same period of the prior year.

Income excluding net realised gains was $41.9 million, or 14 cents per share, compared with $164.3 million, or 65 cents per share, reported a year earlier.

On that basis, Wall Street expected 15 cents a share, in a range of break-even to 23 cents, according to analysts polled by research firm Thomson Financial/First Call.

Gross premiums written during the quarter increased by 65 percent to $2.7 billion, compared with $1.6 billion for the comparable quarter in 2000.

Net premiums written during the quarter were $1.9 billion, up from $1 billion a year earlier, an increase of 83 percent. Net premiums earned during the quarter were up 62 percent to $1.8 billion from $1.1 billion a year earlier.

Net investment income, excluding net realized gains, was $192 million for the quarter, compared with $209 million for the same period last year.

ACE shares closed at $40.16 on the New York Stock Exchange on Tuesday.