David Fox Competition and rating pressures in a soft market are a couple of the reasons Bermuda insurer ACE Ltd. is seeing a drop off in premiums of the original business lines of excess liability and directors & officers (D&O).

But the company's business diversification has opened several new lines of opportunity for continued market penetration.

ACE chairman, president and CEO Brian Duperreault said during an international teleconference with journalists yesterday, "We posted excellent results this quarter, while completing several initiatives such as the acquisition of ACE USA and CAT Ltd. and a joint venture with Capital Re which will pay increasing benefits to our shareholders in subsequent years.'' Subsidiary ACE Insurance results for the first two quarters reflect the growing prominence of financial lines and satellite business.

Premium contributions from ACE USA and Lloyd's operations allowed an increase in the overall premium production in a difficult market.

ACE is also using far more reinsurance than ever before. There is reinsurance on every line, except D&O, and the company intends to use more in the future.

The company continues to walk away from business that is too poorly priced, but in specific lines has continued to find new accounts.

Out of the premium production for ACE Insurance in the first two quarters of $250.9 million (1997: $251.1 million), financial lines led the way at $63.8 million, followed by excess liability ($52 million), satellite ($58.3 million) and D&O ($43.4 million).

For the same period, the catastrophe business of subsidiary Tempest Re grossed $51.9 million, down from $74.2 million in the six month period the year before. Lloyd's syndicates generated $71.6 million, up from $10.5 million.

The combination of Tempest Re and newly acquired CAT Ltd. will be housed in Wessex House on Reid Street as of this July. CAT's results will be included in ACE results for the first time for the third quarter.

And the first contribution from newly-acquired ACE USA totalled $38.7 million in the second quarter. The current mix of business at ACE USA is 95 percent property and five percent casualty on a net premiums written basis.

Mr. Duperreault said, "Our excess liability writings continues to maintain adherence to underwriting discipline in the midst of a difficult market.

"We declined to renew several accounts where clients' expectations in the areas of price reductions, along with broader terms and conditions were unacceptable to us. Our risk profile continues to improve through reduced limits and increased attachment points.'' Mr. Duperreault said, "During the quarter, we entered into a quota share treaty, ceding 25 percent of our exposures and have also put in place an excess of loss treaty that limits the retained risk on a single occurrence to $100 million.

"In satellite, several factors affected the results during the quarter. There were some launch delays and postponements. We also had lower limits at risk on launches, as the capacity available exceeds the per launch requirements.'' More reinsurance was also purchased to cover catastrophic events. And more D&O accounts were added, despite the unfavourable market conditions.

Mr. Duperreault was mindful of the concerns being raised about the immediate market future returns at Lloyd's, but he said the immediate returns have been good.

ACE is to consolidate the Lloyd's operations into a single managing agent, with a single syndicate and one capital base.

By the year 2000, each divisional unit will operate as an individual profit centre, but sharing one capital base, streamlining processes such as the purchase of reinsurance and investment activities. The aviation syndicates are to be merged for the 1999 year of account, creating one of the largest specialist aviation syndicates at Lloyd's.

ACE FIGURES Gross premiums written: $242,857,000 up 19.4% Net premiums written: $196,649,000 up 4.3% Net premiums earned: $184,746,000 up 16.5% Net investment income: $ 73,129,000 up 25.9% Losses and loss expenses:$116,265,000 up 10.4% DELIGHTED -- ACE chairman, president and CEO Brian Duperreault