million in its second quarter, the insurance company said.

The profit is 37 percent ahead of second quarter 1996 when net income was $56.8 million. Per share earnings were $1.34 versus $1.22.

Half year profit is on a similar track, $203.7 million compared to $150.3 million, a 36 percent increase over the prior year's first six months.

"The success of our diversification strategy is demonstrated by our strong results, given continuing soft market conditions,'' ACE chairman, president and CEO Brian Duperreault said.

"We are pleased that the expansion of our new areas, particularly property catastrophe, offsets the decline in excess liability.'' ACE began with excess liability and excess directors and officers (D&O) liability insurance, added satellite, aviation, excess property and financial lines, and acquired property catastrophe reinsurer Tempest Reinsurance Company Ltd.

In second quarter, Tempest added $31 million in new net premium earned to the company's the financial results ($72.5 million in both new net premium written and gross premium written).

Excess liability net premium earned fell 30 percent in second quarter compared to the same three months in the prior year; $46.1 million compared to $59.8 million.

D&O net premium earned was off nine percent, $24.5 million in the recent quarter compared to $26.7 million in second quarter last year.

As part of its diversification strategy, ACE also owns three Lloyd's of London managing agencies providing corporate capital to Lloyd's syndicates under their management.

Lloyd's added $4.6 million in new net premium earned during second quarter.

Total second quarter net premium written was $188.6 million versus $177.5 million while net premium earned was $158.6 million versus $146.4 million.

For six months, net premiums written fell to $299.2 million from $306.3 million. Net premium earned for the first half was $323.0 million versus $262.4 million.

The company also said income excluding net realised investment gains and losses was $80.3 million compared to $51.5 million (six months; $164.3 million, $100.5 million).

Net quarter investment income, excluding net realised gains and losses, was $58.1 million versus $48.3 million (six months; $117.8 million, $95.4 million).

In the quarter, ACE said there were net realised loss of $2.3 million compared to a gain of $5.3 million (six months; $39.4 million, $49.9 million).

Due to an increase in the market value of its stock, the company has paid expenses for stock appreciation rights totalling five cents per share, ACE said.

Quarter losses were $105.3 million compared to $121.1 million (half year; $215.4 million, $214.0 million).

BRIAN DUPERREAULT -- Strong results prove ACE diversification strategy is working.