Tempest Re, the Bermuda-based property catastrophe reinsurer it purchased last year.

The three year old `cat' reinsurer gives ACE a foothold in both the reinsurance and property catastrophe markets, providing another avenue for expanding its client base.

ACE chairman and CEO Brian Duperreault said: "Tempest will actively seek ways to diversify its product offerings.'' As the architect of bold and rapid diversification at ACE, Mr. Duperreault told shareholders last week in the annual report that such diversification has significantly increased the insurer's ability to compete in the global insurance and reinsurance markets.

The report, entitled "Depth Diversity Direction'', said the strategy has been to execute an agenda toward new product development and new market opportunities.

Mr. Duperreault said: "The opening of countries previously under Communist rule, new communications technologies and the ease of international travel are just a few of the activities occurring in this last decade of the century to form a truly worldwide basis in which to conduct business.

"A company must be poised to take advantage of this trend if it wants geographic spread, better legal environments and, possibly better underwriting margins.

"The driving forces of insurance are the well-capitalised companies that can provide the economies of scale demanded by clients. Buyers want fewer insurance companies on their programmes; they want larger limits; they want long term deals; and, they want large net capacity.

"We realised that to remain focused solely on our original product offerings of excess liability and excess directors and officers (D&O) liability coverage was limiting. So over the past two years we've added new products and made strategic acquisitions.'' Apart from Tempest Re, the "strategic acquisitions'' include the parent to one of the largest managing agencies at Lloyd's of London, Methuen Group Ltd., which manages six Lloyd's syndicates, and Ockham Worldwide Holdings Plc, the parent to two other Lloyd's agencies which manage a further seven syndicates.

ACE's Lloyd's operations now include three agencies and 13 syndicates with combined capacity of about $1.1 billion for this year, one of the largest Lloyd's agency groupings under one management.

ACE projects the use of more than $200 million of underwriting capacity in 1997, as they capitalise on enhanced access to world markets through Lloyd's.

In the year ahead for its large capacity line of excess liability, ACE will seek to further reduce exposures and target more non-US areas in a difficult market environment.

The company provides the largest single source of D&O cover and in a highly competitive market this year will emphasise international expansion and possibly explore regulatory uncertainties that have been identified.

ACE will also have to pay attention to its satellite cover, with its technical and engineering expertise and one of the market's largest single sources of capacity.

Underwriters will seek to improve on the satisfying $119 million in written premiums for financial lines, while targeting a US client base and working with brokers on finite risk opportunities.

There were strong renewals last year in the aviation line which continue to gain strength because aerospace manufacturers have full order books and a growing backlog. There is potential for strong premium growth as commercial air travel continues to grow.

In excess property, ACE sees potential for strong premium growth and a global expansion of accounts.

The continued and increasing maturation of ACE as a global force has not gone unnoticed by investors. The company's share performance was significantly better over the year to September 30 than the S&P 500 Index.

The total return on investment -- stock price appreciation plus dividends -- was a staggering 56 percent. That compares to the S&P 500 index growth of 20 percent.

The stock price really began climbing through the roof after the February announcement of the ACE takeover of Bermuda `cat' company Tempest Re. That day the share price was around $48. Today, it is closing in on $60.

By the end of the fiscal year, ACE's market value had grown to nearly $3.1 billion, an increase of $1.2 billion when compared to 1995.

Shareholders' equity grew 56 percent over the year to more than $2.2 billion.

Total assets increased to $4.6 billion. Loss reserves were $1.8 billion, an increase of $400 million over 1995.

Growth in premiums written was nearly 42 percent (1996: $603 million). The company declared record net income for the year at close to $290 million.

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