Duperreault has told shareholders by letter that the benefits of the company's diversification were evident in the 1997 second quarter results.

He declared: "In an extremely competitive market, we're stronger today than ever before.'' Mr. Duperreault said the company is strengthening their Lloyd's operations, merging the three managing agencies into two and have established one central management and support services team for both.

He said, "We have proposed the merger of specific syndicates to create major new underwriting units with the size and competitive potential appropriate to the changing marketplace.

"We've taken a meaningful position in Lloyd's new underwriting operation in Japan and William Loschert, chairman of our London operations, is on the Lloyd's Japan board. This is an early indication of our international expansion through Lloyd's.'' The competitive environment in excess liability is affecting the pricing of business, limits and attachment points and client selection.

Also client retention remains about 90 percent, ACE's response to market conditions resulted in an improved risk profile. The business that was not renewed represented higher premium and higher risk accounts.

Mr. Duperreault said, "D&O also continues to maintain retention rates at 90 percent, amid strong competition. Satellite noted some softening in the market but posted excellent results.

"Aviation continues to exhibit good growth and profitability. Excess property had an excellent quarter and is a line where we've been very successful at cross-marketing.

"As expected we continue to see variable premium flows for financial lines; however, activity remains strong as a wide variety of clients explore alternative structures.'' ACE joined EXEL Ltd. and Risk Capital Reinsurance Co. to form Sovereign Risk Insurance Ltd. to provide political risk insurance, cover for foreign investments in developing countries against political instability.

Mr. Duperreault said that Sovereign has already received submissions from brokers. And through a treaty with the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, ACE has agreed to provide MIGA additional capacity to support developmentally sound investment projects.

The company's recently purchased property catastrophe unit, Tempest Re, wrote premiums of $72 million, down five percent from the previous year's second quarter, due to real rate reduction, increasing attachments and some cancellations in a competitive market.

ACE still believes that there are opportunities to expand Tempest's product offerings.

Underwriting discipline is still being stressed across all lines. Net premiums written were $189 million for the quarter and $299 million for the first six months, compared to $177 million and $306 million for the same periods last year.

Net premiums earned were up nine percent for the quarter to $159 million, and up $59 million to $323 million for the six month period.

ACE's fully diluted net asset value per share is $40.06.