Fox . One of the key ingredients of the insurer's success is an apparent willingness to experiment.

There's change in the air at Bermuda-based insurer, ACE Ltd., although the one constant is its continued success. Last week the company again announced record results, including net income of $461,354,000 for the year to September 30.

But the change has been the increasingly varied business lines that are being used to underpin that success.

ACE burst into the liability market in the mid-80s, and by 1987 wrote $180.2 million in excess liability premium and $93.3 million in D&O premium, for a total gross premiums written of $273.5 million.

A success born out of a lack of capacity in those lines, the company immediately made a good living, beginning underwriting operations on November 1, 1985 and declaring bottom line profits of nearly $242 million in 1987 and almost $250 million in 1988.

By 1994, net premiums written in excess liability had risen to $267 million, and D&O had risen to $107.5 million. But the tide had already begun to turn, with a soft and highly competitive market pushing rates down and forcing companies like ACE to decide not to write business that they felt may not have been adequately priced.

In the 1997 year to September 30, net premiums written mushroomed to $639.7 million. But that included just $139.6 million in excess liability (1996: $202.3 million) and $85.4 million in D&O premium (1996: $97.6 million).

ACE had been concentrating on diversifying its business to continue to increase premium writing, while market forces were impacting its original lines.

Still, in the face of extremely successful bottom line results, ACE chairman, president and CEO, Brian Duperreault was very philosophical about the turn in fortunes for excess liability, originally its key breadwinner.

He said, "Without question there remains market pressure on the excess liability area, and that pressure has been running for some time.

"It's hard to predict how long markets like this will last. In terms of a product line, it remains very viable. The question remains: what will the book of business look like next year and the year after. It is certainly a good book of business.

"And the D&O is frankly also a very good book of business, but it is under competitive pressure. But I don't think there is anything extraordinary about what is going on. It has happened before.

"You just have to be professional about it, by writing the risks that you should write, get the premium you think is adequate for the risks you are taking, and move on, without wringing your hands thinking it's a terrible situation.

"It is the situation you have, and the professional underwriters do well in this kind of market, too.'' The success of ACE has come through positive results from a strategic diversification.

Net premiums written in financial lines were $117.2 million in 1997, just $2 million shy of last year's writings. Excess property rose year over year from $13.9 million in 1996 to $24.2 million in 1997. The Lloyd's syndicates have begun to pay big dividends, responsible for net premiums written of $55.8 million this year (1996: $9.7).

Meanwhile, in the other still relatively new lines, aviation has stood still at about $27 million and the satellite business shows a drop to $68.1 million (1996: $85.3 million).

Mr. Duperreault said, "The property and aviation are absolutely growing at the rate that I expected. They are run by good people, who have been very intelligent and prudent with the way they have gone about the business.

"With the financial lines side, I wasn't sure where we would go with it, frankly. It was more of an experiment, not an area that ACE had done before.

It was an area that had potential, but we just didn't know how much. So I have been very pleasantly surprised with the progress we have made in financial lines.

"And the satellite business has been terrific.'' But while the Lloyd's business has done well given the state of the market, Mr. Duperreault believes a strong ACE presence there will reap much better dividends in the future.

He said, "Lloyd's itself is resurgent. It has just been affirmed as a strong entity, a very viable enterprise. So I think that there is a lot more for Lloyd's to do over the next several years.'' ACE's results were again buoyed by a successful investment year, with net investment income 15 percent higher than last year at $237.8 million.

The company declared losses and loss expenses at $435.9 million (1996: $464.8 million). That included losses and loss expenses for property catastrophe reinsurance subsidiary Tempest Reinsurance Co. Ltd. of just $10.4 million. Mr.

Duperreault commented: "We've had reasonable loss experience. If you break it down, Tempest had an extraordinary year. Nothing happened. So there was nothing to complain about there.

"On the (insurance subsidiary) A.C.E. Insurance side, we've had good loss experience, well within our expectations. We're comfortable with it.'' Brian Duperrault Graphic file name: DUPPER