Bermuda-based ACE Ltd. continues its international expansion, announcing yesterday an agreement to pay about $500 million for Tarquin Plc, an underwriter in the Lloyd's of London insurance market.

ACE's latest investment in overseas business boosts its Lloyd's business by more than a third. Tarquin is the UK-based holding company which owns Lloyd's managing agency Charman Underwriting Agencies Ltd. and Tarquin Underwriting Ltd., its corporate capital provider.

ACE chairman, president and chief executive officer Brian Duperreault said the acquisition continues the growth of the company's global business.

"This will make ACE one of Lloyd's largest providers of corporate capital and underscores ACE's commitment to developing its business in the UK and international markets,'' he said.

The Charman syndicates underwrite short-tail marine, aviation, political risk and specialty property-casualty insurance and reinsurance.

"The Charman business is business that we didn't have in great supply in the London market so it's complementary,'' Mr. Duperreault said. "The first thing is it's a great fit. Then you take their client base and their leadership and innovation and add it with our capabilities in Bermuda and across the world, we can see that being the next level. You can marry up all the capabilities of the company.'' ACE, as the largest Lloyd's managing agency group under a single management, will now account for 9.3 percent of the market's total underwriting capacity or about $1.6 billion.

ACE is buying the additional capacity by paying 14.3 million shares to investors. The merger, expected to be completed next month, will cost $60 million in expenses, ACE stated.

ACE has been on a course of diversification. In 1996 ACE acquired Tempest Reinsurance Ltd., and three Lloyd's managing agencies.

Lloyd's agency Tarquin purchased by ACE Ltd.

In 1998 ACE directly entered the US market with the $338 million purchase of Westchester Specialty Group, now renamed ACE USA. In March ACE bought Bermuda-based catastrophe insurer CAT Ltd. for $711 million.

Mr. Duperreault says the acquisition of CAT Ltd. has gone smoothly and he expects the recent purchase to be digested just as easily.

John Charman, managing director of Tarquin, will become chief executive of ACE UK. The unit's current chief executive, Leslie Goodman, will become head of strategic development at ACE Ltd.

"Every time you add a company you have to recognise it does pull some resources -- time and energy for everybody in the company,'' he said. "What we are trying to do is put companies together that have strengths in their own rights. In Charman's case, he and his group are very complementary to what we have at Lloyd's and frankly I think the transition will be relatively painless because of that.'' The Charman syndicates adds 30 employees to ACE's 250 employees in the London market. ACE employs 200 people in Bermuda, and another 200 in the US.

ACE's stock has gained 53 percent in the 12 months ended yesterday, beating an 11 percent rise in the Standard & Poor's property-casualty insurance index.

After the purchase announcement Standard & Poor's affirmed ACE Ltd.'s `A plus' counterparty credit and financial strength ratings. S&P stated it expected ACE to achieve a 20 percent average return on revenue in the medium term, and to continue to pursue growth through acquisition.

Brian Duperreault Graphic file name: BRIANDU