UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____________ to _____________
Commission File No. 1-11778 I.R.S. Employer Identification No. N/A
ACE LIMITED
 (Incorporated in the Cayman Islands)

The ACE Building
30 Woodbourne Avenue
Hamilton HM 08
Bermuda
Telephone 441-295-5200
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES ____x___ NO _________
The number of registrant's Ordinary Shares ($0.125 par value) outstanding as of May 12, 1997 was 55,803,100.

ACE LIMITED

                             INDEX TO FORM 10-Q

Part I.  FINANCIAL INFORMATION
- -------------------------------

                                                                     Page No.

Item 1. Financial Statements:

        Consolidated Balance Sheets
               March 31, 1997 (Unaudited) and September 30, 1996        1	

Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, 1997 and March 31, 1996 Six Months Ended March 31, 1997 and March 31, 1996 2
Consolidated Statements of Shareholders' Equity (Unaudited) Six Months Ended March 31, 1997 and March 31, 1996 3
Consolidated Statements of Cash Flows (Unaudited) Six Months Ended March 31, 1997 and March 31, 1996 4
Notes to Interim Consolidated Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 8
Part II. OTHER INFORMATION
Item 5. Other information 25
Item 6. Exhibits and Reports on Form 8-K 25
Signatures 26

                                                ACE LIMITED AND SUBSIDIARIES
                                                CONSOLIDATED BALANCE SHEETS
                                           March 31, 1997 and September 30, 1996
                                                                                            March 31      September 30
                                                                                              1997            1996
                                                                                            ---------------------------
                                                                                           (unaudited)
                                                                                           (in thousands of U.S. Dollars,
                                                                                           except share and per share data)

ASSETS
Investments and cash
      Fixed maturities, at fair value
          (amortized cost - $3,310,876 and $3,394,437)                                    $3,264,759        $3,389,762
      Equity securities, at fair value (cost - $435,859 and $257,049)                        472,445           323,005
      Short-term investments, at fair value (amortized cost - $371,199 and $376,680)         371,442           376,680
      Other investments, at cost                                                              12,453            12,453
      Cash                                                                                    87,581            53,374
                                                                                       -------------     -------------

          Total investments and cash                                                       4,208,680         4,155,274

Goodwill on Tempest acquisition                                                              199,204           201,742
Accrued investment income                                                                     42,451            42,728
Deferred acquisition costs                                                                    31,227            34,546
Premiums and insurance balances receivable                                                    97,982            85,033
Prepaid reinsurance premiums                                                                  22,792            15,421
Other assets                                                                                 110,955            39,614
                                                                                       -------------      ------------

                           Total assets                                                   $4,713,291        $4,574,358
                                                                                          ==========        ==========

LIABILITIES
Unpaid losses and loss expenses                                                           $1,925,011        $1,836,113
Unearned premiums                                                                            382,973           398,731
Premiums received in advance                                                                  35,020            26,381
Accounts payable and other liabilities                                                        86,561            54,913
Dividend payable                                                                              10,506            10,471
Reinsurance balances payable                                                                   1,172             3,471
                                                                                      --------------    --------------

          Total liabilities                                                                2,441,243         2,330,080
                                                                                         -----------       -----------

Commitments and contingencies

SHAREHOLDERS' EQUITY
Ordinary Shares ($0.125 par value, 100,000,000 shares authorized;
   56,796,129 and 58,170,755 shares issued and outstanding)                                    7,100             7,271
Additional paid-in capital                                                                 1,132,315         1,156,194
Unearned stock grant compensation                                                             (3,355)           (1,299)
Net unrealized appreciation (depreciation) on investments                                     (9,288)           61,281
Cumulative translation adjustment                                                              1,210               131
Retained earnings                                                                          1,144,066         1,020,700
                                                                                         -----------       -----------

          Total shareholders' equity                                                       2,272,048         2,244,278
                                                                                         -----------       -----------

          Total liabilities and shareholders' equity                                      $4,713,291        $4,574,358
                                                                                          ==========        ==========

       See accompanying notes to interim consolidated financial statements	

                                                ACE LIMITED AND SUBSIDIARIES
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                             For the Three Months and Six Months Ended March 31, 1997 and 1996
                                                        (Unaudited)

                                                                Three Months Ended               Six Months Ended
                                                                     March 31                        March 31
                                                               1997            1996             1997         1996
                                                          -----------      ----------        ----------    -----------
                                                        (in thousands of U.S. Dollars,  except share and per share data)

REVENUES
    Gross premiums written                                 $   203,333    $   188,894       $   335,845   $   320,375
    Reinsurance premiums ceded                                 (14,745)       (11,359)          (36,643)      (14,045)
                                                          ------------   ------------      ------------  ------------

    Net premiums written                                       188,588        177,535           299,202       306,330
    Change in unearned premiums                                (29,947)       (31,142)           23,839       (43,953)
                                                          -------------  ------------      ------------  ------------

    Net premiums earned                                        158,641        146,393           323,041       262,377
    Net investment income                                       58,094         48,312           117,832        95,438
    Net realized gains (losses) on investments                  (2,339)         5,261            39,384        49,863
                                                         ------------- --------------      ------------  ------------

               Total revenues                                  214,396        199,966           480,257       407,678
                                                          ------------   ------------       -----------   -----------

EXPENSES
    Losses and loss expenses                                   105,290        121,076           215,440       214,000
    Acquisition costs                                           11,887         12,549            26,016        24,663
    Administrative expenses                                     19,270          9,538            35,111        18,676
                                                          -------------  -------------      ------------ -------------

               Total expenses                                  136,447        143,163           276,567       257,339
                                                          ------------   ------------       -----------  ------------

NET INCOME                                                $     77,949   $     56,803        $  203,690   $   150,339
                                                          ============   ============        ==========   ===========

Earnings per share                                             $ 1.34          $ 1.22           $ 3.48         $ 3.24
                                                               ======          ======           ======         ======

Weighted average shares outstanding                         58,112,439     46,459,621        58,600,898    46,462,323
                                                            ==========     ==========        ==========    ==========

       See accompanying notes to interim consolidated financial statements

                                           2	

                                                ACE LIMITED AND SUBSIDIARIES
                                      CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                      For the Six Months Ended March 31, 1997 and 1996
                                                        (Unaudited)
                                                                                            March 31         March 31
                                                                                             1997            1996
                                                                                         ------------   --------------
                                                                                         (in thousands of U.S. Dollars)

Ordinary Shares
      Balance - beginning of period                                                   $        7,271   $         5,764
      Exercise of stock options                                                                    8              --
      Issued under Employee Stock Purchase Plan                                                    1              --
      Issued under Stock Appreciation Right Replacement Plan                                       8              --
      Repurchase of shares                                                                      (188)               (1)
                                                                                     ---------------  ----------------
          Balance - end of period                                                              7,100             5,763
                                                                                      --------------    --------------

Additional paid-in capital
      Balance - beginning of period                                                        1,156,194           548,513
      Exercise of options for Ordinary Shares                                                  1,641             --
      Issued under Employee Stock Purchase Plan                                                  228             --
      Issued under Stock Appreciation Right Replacement Plan                                   3,919             --
      Cancellation of awards                                                                     (87)            --
      Repurchase of Ordinary Shares                                                          (29,580)              (72)
                                                                                       -------------  ----------------

          Balance - end of period                                                          1,132,315           548,441
                                                                                         -----------      ------------

Unearned stock grant compensation
      Balance - beginning of period                                                           (1,299)           (1,796)
      Stock grants awarded                                                                    (3,225)             (272)
      Stock grants forfeited                                                                      79                60
      Amortization                                                                             1,090               488
                                                                                     ---------------  ----------------

          Balance - end of period                                                             (3,355)           (1,520)
                                                                                     ---------------    --------------

Net unrealized appreciation (depreciation) on investments
      Balance - beginning of period                                                           61,281            94,694
      Net depreciation during period                                                         (70,569)          (40,349)
                                                                                      --------------    --------------

          Balance - end of period                                                             (9,288)           54,345
                                                                                     ---------------    --------------

Cumulative translation adjustments
      Balance - beginning of period                                                              131             --
      Net adjustment for period                                                                1,079              (180)
                                                                                     ---------------   ---------------

          Balance - end of period                                                              1,210              (180)
                                                                                     ---------------   ---------------

Retained earnings
      Balance - beginning of period                                                        1,020,700           795,488
      Net income                                                                             203,690           150,339
      Dividends declared                                                                     (20,665)          (12,929)
      Repurchase of Ordinary Shares                                                          (59,659)              (96)
                                                                                       -------------  ----------------

          Balance - end of period                                                          1,144,066           932,802
                                                                                         -----------      ------------

TOTAL SHAREHOLDERS' EQUITY                                                                $2,272,048        $1,539,651
                                                                                          ==========        ==========

                            See accompanying notes to interim consolidated financial statements

                                                              3	

                                                ACE LIMITED AND SUBSIDIARIES
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      For the Six Months Ended March 31, 1997 and 1996
                                                        (Unaudited)

                                                                                            March 31           March 31
                                                                                              1997               1996
                                                                                          -------------     ------------
                                                                                           (in thousands of U.S. Dollars)

Cash flows from operating activities
Net income                                                                               $   203,690        $   150,339
Adjustments to reconcile net income to net cash provided by
operating activities
      Unearned premiums                                                                      (15,758)            43,953
      Unpaid losses and loss expenses                                                         88,898            173,436
      Prepaid reinsurance premiums                                                            (7,371)              --
      Net realized gains on investments                                                      (39,384)           (49,863)
      Amortization of premium/discount                                                        (2,511)            (2,713)
      Deferred acquisition costs                                                               3,319                202
      Insurance balances receivable                                                          (12,949)           (11,779)
      Premiums received in advance                                                             8,639             12,640
      Reinsurance balances payable                                                            (2,299)              --
      Accounts payable and other liabilities                                                  (8,531)             6,296
      Accrued investment income                                                                  277             (6,401)
      Other                                                                                      728             (2,868)
                                                                                    ----------------     --------------

      Net cash flows from operating activities                                               216,748            313,242
                                                                                       -------------       ------------

Cash flows from investing activities
      Purchases of fixed maturities                                                       (3,255,722)        (5,179,119)
      Purchases of equity securities                                                        (402,393)          (108,692)
      Sales of fixed maturities                                                            3,371,215          4,870,057
      Sales of equity securities                                                             224,781            101,492
      Maturities of fixed maturities                                                           5,000             32,580
      Net realized gains on financial futures contracts                                        9,246             14,407
      Acquisitions of subsidiaries, net of cash acquired                                     (30,416)           (11,572)
                                                                                       -------------      -------------

      Net cash used in investing activities                                                  (78,289)          (280,847)
                                                                                       -------------       ------------

Cash flows from financing activities
      Repurchase of Ordinary Shares                                                          (89,427)              (169)
      Dividends paid                                                                         (20,630)           (12,911)
      Proceeds from exercise of options for Ordinary Shares                                    1,649               --
      Proceeds from shares issued under Stock Appreciation Right Replacement Plan              4,156               --
                                                                                         -----------      -------------

      Net cash used for financing activities                                                (104,252)           (13,080)
                                                                                       -------------     --------------

Net increase in cash                                                                          34,207             19,315
Cash - beginning of period                                                                    53,374             16,929
                                                                                      --------------     --------------

Cash - end of period                                                                   $      87,581      $      36,244
                                                                                       =============      =============

           See accompanying notes to interim consolidated financial statements

                                                               4
/TABLE	

                        ACE LIMITED AND SUBSIDIARIES
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)

1.   General

The interim consolidated  financial statements,  which include the accounts
of the Company  and its  subsidiaries,  have been  prepared on the basis of
accounting  principles  generally  accepted in the United States of America
and, in the opinion of management,  reflect all adjustments  (consisting of
normal recurring accruals) necessary for a fair presentation of results for
such  periods.  The  results of  operations  and cash flows for any interim
period are not necessarily  indicative of results for the full year.  These
financial  statements  should be read in conjunction  with the consolidated
financial statements,  and related notes thereto, included in the Company's
1996 Annual Report on Form 10-K.

On November 26, 1996, the Company,  through its wholly-owned subsidiary ACE
UK Limited,  acquired ACE London  Holdings Ltd.  ("ACE  London")  (formerly
Ockham  Worldwide  Holdings  PLC),  a wholly  owned  subsidiary  of  Ockham
Holdings  PLC. ACE London owns two Lloyd's of London  ("Lloyd's")  managing
agencies,  ACE London  Aviation  Limited  ("ALA")  (formerly  Ockham Sturge
Aviation Agency Ltd.) and ACE London Underwriting Limited ("ALU") (formerly
Ockham  Worldwide  Agency  Ltd.).  Together  these two agencies  manage six
syndicates with total underwriting capacity for the 1997 year of account of
(pound)361  million  (approximately  $591 million).  ACE London also owns a
Lloyd's  corporate  member  which  provides  funds at  Lloyd's  to  support
underwriting on these syndicates. The Company is providing funds at Lloyd's
of approximately  (pound)7.5 million (approximately $12 million),  which is
primarily  in the  form of a letter  of  credit,  supporting  approximately
(pound)15 million  (approximately  $25 million) of premium writing capacity
to the syndicates managed by ALA and ALU for the 1997 year of account.  The
acquisition has been recorded using the purchase method of accounting.

On November 26, 1996,  the Company,  through ACE UK Limited,  also acquired
the remaining 49 percent interest in Methuen Group Limited ("Methuen"), the
holding company for Methuen Underwriting Limited,  which it did not already
own. The Company had originally  acquired a 51 percent  interest in Methuen
on March 27, 1996. The acquisition of the remaining 49 percent interest has
been recorded using the purchase method of accounting.

Following the  acquisition  of ACE London in November 1996, the Company has
three  managing  agencies  at  Lloyd's.  The  Company is in the  process of
merging these three agencies into two, with MUL becoming dormant,  and have
established one central management and support team servicing both agencies
and all the syndicates. It is also proposed to merge specific syndicates to
create larger  underwriting  units with the size and competitive  potential
appropriate to the changing marketplace.

In March 1997, the Company,  together with two other  insurance  companies,
formed a  managing  general  agency  in  Bermuda  to  provide  underwriting
services to the three  organizations for political risk insurance coverage.
The new company,  Sovereign Risk Insurance Limited ("Sovereign") will issue
subscription  policies on behalf of the three participants with the Company
underwriting 45 percent of each risk. Sovereign will initially offer limits
of up to $50 million per project and $100 million per country.

At March  31,  1997  approximately  58  percent  of the  Company's  written
premiums came from insureds  based in North America with  approximately  36
percent  coming  from  the  United  Kingdom  and  continental   Europe  and
approximately 6 percent from other countries.

2.   Commitments and Contingencies

A number of the Company's  insureds have given notice of claims relating to
breast  implants  or  components  or raw  material  thereof  that  had been
produced  and/or sold by such insureds.  Lawsuits  including class actions,
involving thousands of implant recipients have been filed in both state and
federal courts throughout the United States. Most of the federal cases have
been  consolidated  pursuant  to the  rules  for  Multidistrict  Litigation
("MDL") to a Federal District Court in Alabama.

On April  1,  1994,  the  judge  presiding  over  the MDL  proceeding  gave
preliminary  approval to a global  settlement  agreement in the approximate
amount of $4.2 billion and conditional  certification to a settlement class
("Global I").

                                     5

                          ACE LIMITED AND SUBSIDIARIES
        NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 (Unaudited)

On May 15, 1995, the Dow Corning Corporation,  a significant participant in
the Global I settlement,  filed for protection under Chapter 11 of the U.S.
Bankruptcy Code.

As of June 1, 1995, over 440,000  registrations were received by the Global
I  Claims  Administrator.  Approximately  248,500  of these  were  filed by
domestic class members by the September 16, 1994 deadline for making claims
under the Current  Disease  Compensation  Program.  Based on an analysis of
about  3,000 of these  registrations,  the  judge  concluded  that a severe
racheting (or reduction) of the  settlement  amounts shown in the notice of
settlement  would occur if current claims were evaluated under the existing
criteria  and  if  funding  of the  Current  Disease  Compensation Program
remained at the $1.2 billion level.

Because of the anticipated racheting of benefit amounts and the defendants'
right to withdraw under the Global I settlement, the judge entered an order
on October 9, 1995  declaring that class members had new opt-out rights and
that, in general,  class members and their  attorneys  should not expect to
receive any benefits under Global I.

On October 1, 1995, negotiators for three of the major defendants agreed on
the essential elements of a revised individual settlement plan for domestic
class  members  with at least one implant  from any of those  manufacturers
("Settlement II"). In general,  under Settlement II, the amounts payable to
individual participants,  and the manufacturers'  obligations to make those
payments,  would not be affected by the number of class members electing to
opt out from the new plan.  Also,  in general,  the  compensation  would be
fixed  rather  than  subject  to  potential  further  racheting,   and  the
manufacturers  would not have a right to walk away because of the amount of
claims payable.  Finally,  each defendant agreed to be responsible only for
cases in which its implant was identified,  and not for a percentage of all
claims.

By  November  13,  1995,  Settlement  II was  approved  by the three  major
defendants. In addition, two other defendants became part of Settlement II,
although   certain  of  their  settlement  terms  are  different  and  more
restricted than the plan offered by the original three defendants.

On December 22, 1995,  the judge  approved  Settlement II and the materials
for giving notice to claimants although an appeal concerning  Settlement II
is pending with the Eleventh Circuit Court of Appeals. In mid-January 1996,
the  three  major  defendants  each  made a payment  of $125  million  to a
court-established  fund as an initial reserve for payments to be made under
Settlement II. The Claims Administrator continues to send out notifications
of  status  and  advance  payments  to  claimants  who  submitted   implant
manufacturer  proof.  Although  option one  closed on  December  16,  1996,
information on the estimated  total cost of Settlement II and the number of
opt-out is not presently available.

Although  the Company has  underwritten  the  coverage  for a number of the
defendant companies including four of the companies involved in the revised
Settlement  II described  above,  the Company  anticipates  that  insurance
coverage  issued  prior to the time the  Company  issued  policies  will be
available  for a portion of the  defendants'  liability.  In addition,  the
Company's  policies  only apply  when the  underlying  liability  insurance
policies or per occurrence retentions are exhausted.

At June 30, 1994, the Company increased its then existing reserves relating
to breast  implant  claims.  Although the reserve  increase  was  partially
satisfied by an allocation from existing IBNR, it also required an increase
in the Company's  total reserve for unpaid losses and loss expenses at June
30, 1994 of $200 million. The increase in reserves was based on information
made available in conjunction with Global I (including information relating
to opt-outs) and information made available from the Company's insureds and
was predicated  upon an allocation  between  coverage  provided  before and
after the end of 1985 (when the Company commenced underwriting operations).
No additional  reserves  relating to breast  implant claims have been added
since June 30, 1994.

                                     6	

                        ACE LIMITED AND SUBSIDIARIES
     NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 (Unaudited)

The Company  continually  evaluates  its  reserves  in light of  developing
information and in light of discussions and negotiations with its insureds.
In August 1996, the Company  settled with one of its  policyholders,  for a
sum of money to be paid out over a number of years.  The first  payment was
made in December  1996.  The  settlement is  consistent  with the Company's
belief that its reserves are  adequate.  In April 1997,  the Company made a
payment to another  policyholder in the amount of $100 million.  Additional
limits  remain for this  insured.  This payment was expected by the Company
and was included in previous reserves.  Significant  uncertainties continue
to exist with regard to the ultimate  outcome and cost of Settlement II and
the number and value of the opt-out claims.  While the Company is unable at
this time to  determine  whether  additional  reserves,  which could have a
material adverse effect upon the financial condition, results of operations
and cash flows of the Company,  may be necessary in the future, the Company
believes that its reserves for unpaid  losses and loss  expenses  including
those arising from breast implant claims are adequate as at March 31, 1997.

3.  Shares Issued and Outstanding

On February 7, 1997,  the Board of Directors  terminated  the then existing
share  repurchase  program  and  authorized  a new program for up to $100.0
million of the Company's Ordinary Shares. During the six month period ended
March 31, 1997, the Company repurchased 1,504,000 Ordinary Shares under the
share  repurchase  programs for an aggregate cost of $89.4  million.  As at
March 31, 1997,  approximately  $69.0 million of the February 7, 1997 Board
authorization had not been utilized.

4.  Restricted Stock Awards

During the quarter ended March 31, 1997, 5,000  restricted  Ordinary Shares
were  awarded to an officer of the  Company.  These  shares vest at various
dates through November 1999. In addition,  5,028 restricted Ordinary Shares
were  awarded to outside  directors  of the Company  under the terms of the
1995  Outside  Directors  Plan.  These shares vest in February  1998.  Also
during the quarter,  2,500 restricted Ordinary Shares were forfeited due to
resignations by officers of the Company and its subsidiaries.

5.   Credit Facilities

The Company has a committed  line of credit  provided by a syndicate of six
major international banks, led by Morgan Guaranty Trust Company of New York
("Morgan")  which  provides  for  unsecured  borrowings  up to an aggregate
amount of $50 million. The line of credit agreement requires the Company to
maintain consolidated tangible net worth of not less than $1.25 billion. At
March 31, 1997, there were no outstanding loans under this arrangement.

With effect from  November 22, 1996,  the same  syndicate of banks has also
provided up to (pound)70.3 million  (approximately $115 million) for a five
year,  collateralized letter of credit ("LOC"),  which is primarily used to
provide  funds at  Lloyd's  to  support  underwriting  capacity  on Lloyd's
syndicates in which the Company participates.  Certain assets, amounting to
115 percent of the value of the LOC,  have been pledged as  collateral  for
the LOC. At March 31, 1997 there were no drawdowns on the LOC.

6. Reclassification

Certain  items  in  the  prior  period   financial   statements  have  been
reclassified to conform with the current period presentation.

                                 7	

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             RESULTS OF OPERATIONS AND FINANCIAL CONDITION

General

The  following  is a discussion  of the  Company's  results of  operations,
financial  condition,  liquidity  and capital  resources  as of and for the
three and six months ended March 31, 1997.  The results of  operations  and
cash flows for any interim period are not necessarily indicative of results
for the full year. This discussion  should be read in conjunction  with the
consolidated   financial   statements,   related   notes  thereto  and  the
Management's Discussion and Analysis of Results of Operations and Financial
Condition included in the Company's 1996 Annual Report on Form 10-K.

ACE Limited ("ACE") is a holding company which,  through its  Bermuda-based
operating  subsidiaries,  A.C.E. Insurance Company, Ltd. ("ACE Insurance"),
Corporate  Officers  &  Directors   Assurance  Ltd.  ("CODA")  and  Tempest
Reinsurance Company Limited ("Tempest"), provides insurance and reinsurance
for a diverse  group of  international  clients.  In addition,  the Company
provides funds at Lloyd's of London ("Lloyd's") to support  underwriting by
syndicates  managed  by Methuen  Underwriting  Limited  ("MUL")  ACE London
Aviation Limited ("ALA") and ACE London Underwriting Limited ("ALU"),  each
indirect wholly owned subsidiaries of ACE. The term "the Company" refers to
ACE and its  subsidiaries,  excluding  Methuen (as  defined  below) and ACE
London (as defined below).

On July 1, 1996,  the Company  completed  the  acquisition  of  Tempest,  a
leading Bermuda-based property catastrophe  reinsurer.  Tempest underwrites
property catastrophe reinsurance on a worldwide basis,  emphasizing excess
layer coverages,  and has large aggregate exposures to man-made and natural
disasters.  Property catastrophe loss experience is generally characterized
by low frequency but high  severity  short-tail  claims which may result in
significant volatility in financial results.

On March 27, 1996, the Company  acquired a controlling  interest in Methuen
Group Limited  ("Methuen"),  the holding company for MUL, a leading Lloyd's
managing  agency.  On November 26, 1996, the Company acquired the remaining
49 percent  interest in Methuen.  MUL manages six  syndicates  with a total
underwriting  capacity of (pound)366 million  (approximately  $555 million)
for the 1996 year of account and  (pound)384  million  (approximately  $629
million) for the 1997 year of account.  Total underwriting  capacity is the
amount of gross  premiums  that a syndicate at Lloyd's can  underwrite in a
given year of account.  However, a syndicate is not required to fully
utilize all of the capacity and it is not unusual for capacity  utilization
to be  significantly  lower than 100 percent.  For the 1996 year of account,
the Company,  through a corporate subsidiary, has participated in the
underwriting of these syndicates by providing funds at Lloyd's of
(pound)12.25  million (approximately  $18 million),  which was primarily
in the form of a letter of credit, supporting (pound)24.5 million
(approximately $37 million) of underwriting  capacity.  For the 1997 year of
account, the Company, through a corporate subsidiary, has provided funds at
Lloyd's of approximately  (pound)64 million (approximately $105 million) to
support up to approximately (pound)128 million (approximately $209 million)
of premium  writing  capacity by syndicates  managed by MUL. The syndicates
managed  by MUL in which  the  Company  participates  underwrite  aviation,
marine and non-marine risks.

On November 26, 1996, the Company  acquired ACE London  Holdings Ltd. ("ACE
London")   (formerly  Ockham  Worldwide   Holdings  PLC),  a  wholly  owned
subsidiary  of Ockham  Holdings  PLC. ACE London owns two Lloyd's  managing
agencies,  ALA and ALU.  Together these two agencies  manage six syndicates
with total underwriting capacity for the 1997 year of account of (pound)361
million  (approximately  $591  million).  ACE  London  also  owns a Lloyd's
corporate member which provides funds at Lloyd's to support underwriting on
these  syndicates.  For the 1997 year of  account  the  Company,  through a
corporate  subsidiary,  is  providing  funds at  Lloyd's  of  approximately
(pound)7.5 million  (approximately $12 million),  which is primarily in the
form of a letter of  credit,  supporting  approximately  (pound)15  million
(approximately  $25 million) of premium writing  capacity to the syndicates
managed by ALA and ALU. The syndicates  managed by ALA and ALU in which the
Company participates underwrite aviation and non-marine risks.

Following the  acquisition  of ACE London in November 1996, the Company has
three  managing  agencies  at  Lloyd's.  The  Company is in the process of
merging these three agencies into two, with MUL becoming dormant,  and have
established one central management and support team servicing both agencies
and all the syndicates. It is also proposed to merge specific syndicates to
create larger  underwriting  units with the size and competitive  potential
appropriate to the changing marketplace.

                                      8

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)

The Company's excess liability  insurance policy generally  provides limits
of up to a maximum of $200  million per  occurrence  and annual  aggregate,
with a minimum attachment point generally of $100 million.  For all new and
renewal  business,  effective  December 15, 1994,  the Company  reduced the
maximum limits offered for integrated occurrences from $200 million to $100
million.  The Company maintains excess of loss clash reinsurance to protect
it from  losses  arising  from a single set of  circumstances  (occurrence)
covered by more than one excess liability insurance policy. The reinsurance
provides  protection  to a maximum of $150  million,  and in the  aggregate
excess of $225 million,  for each and every loss occurrence involving three
or more insureds.  Integrated occurrences are specifically excluded.

The Company  offers up to $75 million of limits in  directors  and officers
liability  coverage.  The Company  does not  purchase  reinsurance  for its
directors and officers liability risks.

The Company began satellite  insurance  operations in February 1994.  Until
February 15, 1996, the Company offered separate limits of up to $25 million
per risk for  launch  insurance,  including  ascent  to orbit  and  initial
operations,  and up to $25 million per risk for  in-orbit  insurance.  This
risk was fully retained by the Company.  Effective for all business written
on or after  February 15, 1996,  the Company  entered into a surplus treaty
arrangement  which provides for up to $25 million of  reinsurance  for each
risk. This reinsurance  arrangement  enabled the Company to raise the gross
limits offered for satellite insurance to $50 million per risk.

During  fiscal  1995,  the  Company  entered  the  following  new  lines of
business:  aviation  insurance,  excess  property  insurance  and financial
lines.

Aviation   insurance  provides  coverage  for  various  aviation  products,
including  aircraft  manufacturers  hull and liability,  as well as airport
liability,  aircraft refueling operations and associated aircraft liability
risks. The Company offers limits of up to $100 million per insured, with no
minimum   attachment  point.  The  Company  reduces  its  net  exposure  to
approximately $50 million per insured with a dedicated reinsurance program.

The Company offers global excess  property "all risk" insurance , providing
limits of up to a maximum  of $50  million  per  occurrence  with a minimum
attachment point generally of $25 million. Coverage includes such perils as
windstorm,  earthquake  and  fire,  as  well  as  explosion.  Consequential
business interruption  coverage is also offered. In certain  circumstances,
the Company uses  reinsurance to establish the retained net limit per risk.
In addition,  the Company has purchased catastrophe  reinsurance to control
the possible effects of cumulative natural peril exposure.

The Company's  financial lines product group offers  specifically  designed
financial,  insurance  and  reinsurance solutions to address  complex risk
management  problems.  The programs  offered  typically  have the following
common  characteristics:  multi-year  contract  terms,  broad coverage that
includes  stable  capacity  and pricing for the insured,  aggregate  policy
limits  and  insured  participation  in  the  results  of  their  own  loss
experience. Each contract is unique because it is tailored to the insurance
or reinsurance  needs,  specific loss history and financial strength of the
insured.  Premium volume, as well as the number of contracts  written,  can
vary significantly from period to period due to the nature of the contracts
being written.  Profit margins  may vary from  contract  to  contract
depending  on the amount of underwriting risk and investment risk assumed
on each contract.

With effect from November 20, 1996, the Company participates in the
reinsurance of Shipowners  Insurance and Guaranty Company Ltd. ("SIGCo"),
a Bermuda-based company  approved by the United  States  Coast  Guard to
provide financial guarantees required by the United States Coast Guard
to allow them to issue Certificates  of Financial  Responsibility  under
the Oil  Pollution Act of 1990 to owners of vessels  operating in U.S.
waters.  SIGCo underwrites the risks  previously  written by the "First Line"
program in which the Company has  participated  since December 1994. The
Company has purchased excess of loss reinsurance to limit its exposure
in this line.

                                  9

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF
        RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)

In March 1997, the Company,  together with two other  insurance  companies,
formed a  managing  general  agency  in  Bermuda  to  provide  underwriting
services to the three  organizations for political risk insurance coverage.
The new company,  Sovereign Risk Insurance Limited ("Sovereign") will issue
subscription  policies on behalf of the three participants with the Company
underwriting 45 percent of each risk. Sovereign will initially offer limits
of up to $50 million per project and $100 million per country.

On April 23,  1997 the Company  announced  that it had signed a quota share
treaty  reinsurance  agreement with the Multilateral  Investment  Guarantee
Agency ("MIGA"),  part of the World Bank Group.  MIGA provides coverage for
foreign investments in developing  countries.  The agreement allows MIGA to
provide private investors and developing  countries  additional capacity to
support  developmentally  sound investment projects.  The coverages offered
will be the same as those  offered  by MIGA's  guarantee  program,  namely,
transfer restriction,  expropriation,  war and civil disturbance and breach
of  contract.  The quota share treaty  offers  limits up to $25 million per
contract with an aggregate of $100 million per country.

The Company will continue to evaluate potential new product lines and other
opportunities in the insurance and reinsurance markets.

Results of Operations - Three Months ended March 31, 1997	

  Net Income                                   Three Months ended   % Change
                                                    March 31         from
                                                 1997      1996     prior year
                                               -----------------   -----------
                                                       (in millions)

Income excluding net realized gains (losses)
 on investments                                  $80.3     $51.5      55.8%
Net realized gains (losses) on investments        (2.3)      5.3       N.M.
                                               -------   -------      -----
Net income                                       $78.0     $56.8       N.M.
                                                 =====    ======      =====

(N.M. - Not meaningful)	

Higher net investment income and income from insurance operations were the main contributors to the 55.8 percent increase in income excluding net realized gains (losses) on investments for the second quarter of fiscal 1997, compared with the corresponding fiscal 1996 quarter. The increase in investment income and income from insurance operations were primarily attributable to the inclusion of the results of Tempest in the current quarter. Tempest contributed $8.6 million to net investment income and $29.9 million to income excluding net realized gains (losses) on investments. These increases were partially offset by an increase in general and administrative expenses.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Results of Operations - Three Months ended March 31, 1997

Premiums                                     Three Months ended   % Change
                                                  March 31         from
                                               1997      1996     prior year
                                             -----------------   -----------
                                                     (in millions)

Gross premiums written:
    Excess liability                           $36.8     $  57.0    (35.5)%
    Directors and officers liability            15.0        16.8    (10.1)
    Satellite                                   22.7        23.8     (4.6)
    Aviation                                     8.4         8.0      5.0
    Excess property                              8.9         6.0     46.8
    Financial Lines                             33.1        73.6    (55.1)
    Lloyd's syndicates                           4.3          --      N.M.
    Property catastrophe (Tempest)              72.5          --      N.M.
    Other                                        1.6         3.7    (56.1)
                                              ------      ------    ------
                                              $203.3      $188.9      7.6%
                                               =====      ======    ======

Net premiums written:
    Excess liability                           $34.1     $  53.1    (35.6)%
    Directors and officers liability            15.0        16.7    (10.1)
    Satellite                                   14.3        20.1    (28.8)
    Aviation                                     6.6         6.5      0.1
    Excess property                              8.9         5.1     72.6
    Financial Lines                             33.1        73.6    (55.1)
    Lloyd's syndicates                           2.7         --       N.M.
    Property catastrophe (Tempest)              72.5         --       N.M.
    Other                                        1.4         2.4    (41.9)
                                              ------      ------    ------
                                              $188.6      $177.5      6.2%
                                              ======      ======    =====	

Net premiums earned:
    Excess liability                           $46.1      $ 59.8    (22.9)%
    Directors and officers liability            24.5        26.7     (8.5)
    Satellite                                   16.7        19.1    (12.4)
    Aviation                                     6.4         4.3     50.2
    Excess property                              5.0         2.8     77.8
    Financial Lines                             21.8        31.1    (29.9)
    Lloyd's syndicates                           4.6         --       N.M.
    Property catastrophe (Tempest)              31.0         --       N.M.
    Other                                        2.5         2.6     (3.8)
                                              ------      ------    ------
                                              $158.6      $146.4      8.4%
                                              ======      ======    =====

(N.M. - Not meaningful)	

11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Results of Operations - Three Months ended March 31, 1997 (continued)
For the three months ended March 31, 1997, gross premiums written increased by 7.6 percent from $188.9 million to $203.3 million despite continuing competitive pressures in most insurance markets. The growth in gross premiums written is mainly attributable to the inclusion of Tempest premiums in the second quarter of fiscal 1997. As Tempest was purchased on July 1, 1996, there are no Tempest premiums in the comparable fiscal 1996 quarter. Tempest's written premiums during the quarter were down approximately 5 percent over last year. This decrease was a result of real rate reduction, increasing attachments and some cancellations due to pricing which was offset somewhat by several new policies written in the quarter. Growth in excess property premiums together with the participation in the Lloyd's syndicates managed by MUL also contributed to the increase. These factors together accounted for a $79.7 million increase in gross written premiums in the quarter. This increase was offset mainly by declines in excess liability and financial lines premiums. The decline in excess liability premiums of $20.2 million was mainly the result of continuing competitive pressures in that market which are expected to continue in the near term. These pressures have adversely effected the pricing of the excess liability business but have also led to a reduction in the Company's exposure and an improved risk profile. Financial lines premiums declined by $40.5 million in the second quarter of fiscal 1997 compared to the second quarter of fiscal 1996 primarily because the opportunity to renew a large premium amount written in the second quarter of fiscal 1996 was not available in the second quarter of fiscal 1997. Directors and officers liability premiums also decreased by $1.8 million or 10.1 percent as this line still faces an extremely competitive environment with its corresponding pressure on prices. However, the effects of multi-year policies and changes in anniversary dates on renewal business positively impacted directors and officers liability premiums this quarter.
Net premiums written increased by 6.2 percent to $188.6 million for the three months ended March 31, 1997, compared with $177.5 million for the second quarter of fiscal 1996. As with gross premiums written, the increase in net premiums written is primarily the result of the inclusion of Tempest premiums in the second quarter of fiscal 1997. Growth in excess property premiums together with the participation in the Lloyd's syndicates managed by MUL also contributed to the increase. These increases were offset somewhat by declines in excess liability, financial lines and satellite premiums.
Net premiums earned increased by 8.4 percent to $158.6 million for the quarter ended March 31, 1997 compared with $146.4 million for the quarter ended March 31, 1996. The growth in net premiums earned was primarily the result of the inclusion of earned premiums from Tempest and the Lloyd's syndicates for the quarter which amounted to $35.6 million together with contributions from aviation and excess property. These increases were offset somewhat by declines in excess liability, directors and officers liability, satellite and financial lines earned premiums.

  Net Investment Income                         Three Months ended   % Change
                                                    March 31         from
                                                 1997      1996     prior year
                                               -----------------   -----------
                                                       (in millions)

Net Investment Income                            $ 58.1    $ 48.3     20.2%
                                                 ======    ======     =====	

The average yield earned on the investment portfolio was approximately the same in the second quarter of fiscal 1997 as compared to the second quarter of fiscal 1996 even with the change in the asset mix between periods. During the quarter ended December 31, 1996, the Company increased the equity exposure of the portfolio to 20 percent from 15 percent. The remainder of the portfolio is comprised of fixed maturity securities. With similar yields in each period, net investment income still increased by $9.8 million or 20.2 percent in the current quarter, as compared with the second quarter of fiscal 1996 primarily as a result of a larger investable asset base due mainly to the inclusion of the Tempest portfolio in the current quarter as well as positive cash flows from operations.
12

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Results of Operations - Three Months ended March 31, 1997 (continued)

Net Realized Gains (Losses) on Investments                 Three Months ended
                                                               March 31
                                                           1997       1996
                                                          ------     ------

Fixed maturities and short-term investments              $10.8       $ 6.5
Equity securities                                          5.3         0.2
Financial futures and option contracts                    (8.4)       (0.4)
Currency                                                 (10.0)       (1.0)
                                                        -------     -------
                                                        $ (2.3)      $ 5.3
                                                        =======      =====	

The Company's investment strategy takes a long-term view and the portfolio is actively managed to maximize total return within certain specific guidelines which minimize risk. The portfolio is reported at fair value. The effect of market movements on the investment portfolio will directly impact net realized gains (losses) on investments when securities are sold. Changes in unrealized gains and losses, which result from the revaluation of securities held, are reported as a separate component of shareholders' equity.
The Company uses foreign currency forward and option contracts to minimize the effect of fluctuating foreign currencies on the value of non-U.S. dollar holdings. The contracts used are not designated as specific hedges and therefore, realized and unrealized gains and losses recognized on these contracts are recorded as a component of net realized gains (losses) in the period in which the fluctuations occur, together with net foreign currency gains (losses) recognized when non-U.S. dollar securities are sold.
In the second quarter of fiscal 1997 the fair value of the Company's investment portfolio was adversely impacted by a general decrease in prices in the U.S. bond markets resulting from an increase in interest rates during the period. However, sales proceeds for fixed maturity securities were generally higher than their amortized cost during most of the quarter which resulted in net realized gains of $10.8 million being recognized on fixed maturities and short-term investments. In the second quarter of fiscal 1996, net realized gains of $6.5 million were recognized on fixed maturities and short-term investments.
The Company recognized net realized gains on sales of equity securities of $5.3 million in the second quarter of fiscal 1997 compared with gains of $0.2 million in the second quarter of fiscal 1996.
Net realized losses on financial futures and option contracts of $8.4 million recorded in the second quarter of fiscal 1997 were primarily generated by futures and option contracts used by certain of the Company's external managers of fixed income securities to manage duration and yield curve exposures. These losses were a result of a rising interest rate environment and were partially offset by gains on the equity index futures contracts held. During the three month period ended March 31, 1996 an increase in interest rates resulted in a market decline for fixed maturity securities, and realized losses from U.S. Treasury futures contracts. These losses were partially offset by realized gains on the S&P 500 index futures contracts in the synthetic equity fund as a result of a rise in the S&P 500 stock index during the period.
Currency losses of $10.0 million in the second quarter of fiscal 1997 were attributable to the strengthening of the U.S. dollar against most major foreign currencies.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Results of Operations - Three Months ended March 31, 1997 (continued)

Combined Ratio                                           Three Months ended
                                                               March 31
                                                           1997       1996
                                                          ------     ------

Loss and loss expense ratio                              66.4%       82.7%
Acquisition cost ratio                                    7.5         8.6
Administrative expense ratio                             12.1         6.5
                                                        -----        -----
Combined ratio                                           86.0%       97.8%
                                                        =======      =====	

The underwriting results of a property and casualty insurer are discussed frequently by reference to its loss and loss expense ratio, acquisition cost ratio, administrative expense ratio and combined ratio. Each ratio is derived by dividing the relevant expense amounts by net premiums earned. The combined ratio is the sum of the loss and loss expense ratio, the acquisition cost ratio and the administrative expense ratio. A combined ratio under 100 percent indicates underwriting profits and a combined ratio exceeding 100 percent indicates underwriting losses. Property catastrophe reinsurance companies generally expect to have overall lower combined ratios as compared with other reinsurance companies with long-tail exposures.
For the three months ended March 31, 1997, the loss and loss expense ratio was 66.4 percent compared to 82.7 percent for the second quarter of fiscal 1996. The ratio for the current quarter is impacted by the inclusion of the results of Tempest. Property catastrophe loss experience is generally characterized by low frequency but high severity short-tail claims which may result in significant volatility in results. For the current quarter, Tempest's loss and loss expense ratio was 6.8 percent. Excluding Tempest, the loss and loss expense ratio would have been 80.9 percent. Several aspects of the Company's operations, including the low frequency and high severity of losses in the high excess layers in certain lines of business in which the Company provides insurance and reinsurance, complicate the actuarial reserving techniques utilized by the Company. Management believes, however, that the Company's reserves for unpaid losses and loss expenses, including those arising from breast implant litigation, are adequate to cover the ultimate cost of losses and loss expenses incurred through March 31, 1997. Since such provisions are necessarily based on estimates, future developments may result in ultimate losses and loss expenses significantly greater or less than such amounts (see "Breast Implant Litigation").
Acquisition costs decreased by $0.7 million and the acquisition cost ratio decreased to 7.5 percent from 8.6 percent in the quarter compared to the second quarter of fiscal 1996 due primarily to the continuing change in the mix of business written by the Company. Administrative expenses increased by $9.7 million in the current quarter compared to the second quarter of fiscal 1996. These additional expenses are primarily due to the increased cost base resulting from the strategic diversification by the Company over the past two years, including the recent acquisitions of Tempest, Methuen and ACE London as well as the development of the new insurance lines and products. In addition, during the quarter, as a result of the increase in the market value of the Company's stock, the Company again recorded expenses related to stock appreciation rights. However, during the quarter, all remaining stock appreciation rights were exercised in return for options and cash and/or shares of the Company. In addition, certain stock appreciation rights were forfeited in return for cash during the quarter. Total expenses incurred in the quarter ended March 31, 1997 relating to these transactions amounted to $3.0 million compared with $1.7 million for the second quarter of fiscal 1996. There were no stock appreciation rights outstanding at March 31, 1997.
14

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Results of operations - Six Months ended March 31, 1997

Net Income                                    Six Months ended      % Change
                                                 March 31            from
                                              1997       1996       prior year
                                             ------     ------      ----------
                                                 (in millions)
Income excluding net realized gains
  (losses) on investments                     $ 164.3    $ 100.4     63.6%
Net realized gains (losses) on investments       39.4       49.9      N.M.
                                            ---------    --------   ------
Net income                                    $ 203.7    $ 150.3      N.M.
                                              =======    =======    ======	

Higher net investment income and income from insurance operations were the main contributors to the $63.9 million or 63.6 percent increase in income excluding net realized gains (losses) on investments for the six months ended March 31, 1997 compared with the corresponding period of fiscal 1996. The increase in investment income and income from insurance operations were primarily attributable to the inclusion of the results of Tempest in the current period. Tempest contributed $17.9 million to net investment income and $61.3 million to income excluding net realized gains (losses) on investments. These increases were partially offset by an increase in general and administrative expenses.
15

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Results of operations - Six Months ended March 31, 1997

Premiums                                      Six Months ended      % Change
                                                March 31            from
                                              1997       1996       prior year
                                              ------     ------     ----------
                                                 (in millions)

Gross premiums written:
Excess liability                              $75.1      $113.4      (33.8)%
Directors and officers liability               49.9        51.4       (3.0)
Satellite                                      41.9        47.8      (12.2)
Aviation                                       13.6        11.1       21.9
Excess property                                14.9        12.2       22.5
Financial Lines                                52.9        73.6      (28.1)
Lloyd's syndicates                             10.5         --         N.M.
Property catastrophe (Tempest)                 74.2         --         N.M.
Other                                           2.8        10.9      (74.5)
                                             ------       -----      ------
                                             $335.8      $320.4        4.8 %
                                             ======      ======      ======

Net premiums written:
  Excess liability                            $72.9      $109.4      (33.3)%
  Directors and officers liability             49.8        51.4       (3.0)
  Satellite                                    28.0        43.5      (35.7)
  Aviation                                     10.6         8.9       19.14
  Excess Property                              14.9        10.4       43.8
  Financial lines                              39.6        73.6      (46.2)
  Lloyd's syndicates                            6.5         --         N.M.
  Property catastrophe (Tempest)               74.2         --         N.M.
  Other                                         2.7         9.1       71.1
                                             ------       -----      ------
                                             $299.2      $306.3       (2.3) %
                                             ======      ======      ======

Net premiums earned:
  Excess liability                            $99.8      $121.5      (17.9)%
  Directors and officers liability             48.1        53.8      (10.5)
  Satellite                                    30.1        37.3      (19.3)
  Aviation                                     12.7         6.4       99.21
  Excess Property                               9.2         4.1      125.2
  Financial lines                              43.4        33.0       31.5
  Lloyd's syndicates                            6.9         --         N.M.
  Property catastrophe (Tempest)               67.1         --         N.M.
  Other                                         5.7         6.3      (10.1)
                                             ------       -----      ------
                                             $323.0      $262.4       23.1%
                                             ======      ======      ======

(N.M. - not meaningful)	

16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Results of operations - Six Months ended March 31, 1997
Gross written premiums increased by 4.8 percent from $320.4 million to $335.8 million despite continuing competitive pressures in most insurance markets. The growth in gross premiums written is mainly attributable to the inclusion of Tempest premiums of $74.2 million during the current six month period. As Tempest was purchased on July 1, 1996, there are no Tempest premiums in the comparable fiscal 1996 period. Growth in excess property and aviation premiums, as these lines continue to penetrate their respective markets, together with the participation in the Lloyd's syndicates managed by MUL also contributed to the increase. These factors together accounted for a $89.9 million increase in gross premiums written. This increase was offset mainly by declines in excess liability, directors and officers liability, satellite and financial lines premiums. The decline in excess liability premiums of $38.3 million was mainly the result of continuing competitive pressures in that market. Financial lines premiums declined by $20.7 million in the six month period ended March 31, 1997 compared to the same period of fiscal 1996 primarily because the opportunity to renew a large premium amount written in the second quarter of fiscal 1996 was not available in the second quarter of fiscal 1997. However, this decline was offset somewhat by a net increase in financial lines premiums during the current period. The decline in satellite gross premiums written of $5.9 million was the result of reduced launch activity in the six month period ended March 31, 1997 compared with the corresponding period in fiscal 1996, where launch activity was considered high. The satellite market is also starting to experience increased competitive pressures. Directors and officers liability still faces an extremely competitive environment with its corresponding pressure on prices. However, the effects of multi year policies and changes in anniversary dates on renewal business positively impacted directors and officers liability premiums this period.
Net premiums written decreased by 2.3 percent to $299.2 million for the six months ended March 31, 1997, compared with $306.3 million for the same period of fiscal 1996. The inclusion of Tempest premiums in fiscal 1997 together with growth in excess property premiums and our participation in the Lloyd's syndicates managed by MUL partially offset declines in excess liability, financial lines and satellite premiums as discussed above for gross written premiums. A portion of the decline in net premiums written is also a result of the Company's decision to purchase reinsurance for the financial lines and satellite product lines.
Net premiums earned increased by $60.6 million or 23.1 percent to $323.0 million for the six months ended March 31, 1997 compared with $262.4 million for the six months ended March 31, 1996. The growth in net premiums earned was primarily the result of the inclusion of earned premiums from Tempest for the period which amounted to $67.1 million together with contributions from financial lines, aviation, excess property and the participation in the Lloyd's syndicates managed by MUL. These increases were again offset somewhat by declines in excess liability, directors and officers liability and satellite earned premiums.

Net Investment Income                         Six Months ended      % Change
                                                 March 31            from
                                              1997       1996       prior year
                                             ------     ------      ----------
                                                 (in millions)

Net investment income                         $117.8     $95.4       23.5%
                                              ======     =====       =====	

17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Results of operations - Six Months ended March 31, 1997
The average yield earned on the investment portfolio was approximately the same in the six month period ended March 31, 1997 as compared to the six month period ended March 31, 1996 even with the change in the asset mix between periods. During the quarter ended December 31, 1996, the Company increased the equity exposure of the portfolio to 20 percent from 15 percent. The remainder of the portfolio is comprised of fixed maturity securities. With similar yields in each period, net investment income still increased by $22.4 million or 23.5 percent in the current period, as compared with the similar period of fiscal 1996 primarily as a result of a larger investable asset base due to the inclusion of the Tempest portfolio in the current period as well as positive cash flows from operations.

Net Realized Gains (Losses) on Investments                Six Months ended
                                                              March 31
                                                         1997        1996
                                                         ------     ------
                                                           (in millions)

Fixed maturities and short-term investments              $ 32.3     $ 32.4
Equity securities                                           9.5        3.0
Financial futures and option contracts                      9.2       14.4
Currency                                                  (11.6)       0.1
                                                         -------    ------
                                                         $ 39.4     $ 49.9	

The Company's investment strategy takes a long-term view and the portfolio is actively managed to maximize total return within certain specific guidelines which minimize risk. The portfolio is reported at fair value. The effect of market movements on the investment portfolio will directly impact net realized gains (losses) on investments when securities are sold. Changes in unrealized gains and losses, which result from the revaluation of securities held, are reported as a separate component of shareholders' equity.
The Company uses foreign currency forward and option contracts to minimize the effect of fluctuating foreign currencies on the value of non-U.S. dollar holdings. The contracts used are not designated as specific hedges and therefore, realized and unrealized gains and losses recognized on these contracts are recorded as a component of net realized gains (losses) in the period in which the fluctuations occur, together with net foreign currency gains (losses) recognized when non-U.S. dollar securities are sold.
In the six month period ended March 31, 1997 the fair value of the Company's investment portfolio was adversely impacted by a general decrease in prices in the U.S. bond markets resulting from an increase in interest rates during the period. However, sales proceeds for fixed maturity securities were generally higher than their amortized cost during most of the period which resulted in net realized gains of $32.3 million being recognized on fixed maturities and short-term investments compared to net realized gains of $32.4 million for the same period last year.
With strong equity markets, net realized gains on sales of equity securities were $9.5 million in the first six months of fiscal 1997 compared with gains of $3.0 million in the first six months of fiscal 1996.
Net realized gains on financial futures and option contracts of $9.2 million recorded in the six months ended March 31, 1997 were primarily generated by the equity index futures contracts held, as a result of a rise in the S&P 500 Stock Index during the period. For the six month period ended March 31, 1996, the realized gains of $14.4 million on financial futures and option contracts were generated from U.S. Treasury futures contracts and from the equity index futures contracts held in the synthetic equity fund as a result of broad market improvements during the period.
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Results of operations - Six Months ended March 31, 1997

Combined Ratio                                           Six Months ended
                                                              March 31
                                                          1997       1996
                                                         ------     ------

Loss and loss expense ratio                              66.7%      81.6%
Acquisition cost ratio                                    8.0        9.4
Administration expense ratio                             10.9        7.1
                                                        -----      -----
Combined ratio                                           85.6%      98.1%
                                                        =====      =====	

For the six months ended March 31, 1997, the loss and loss expense ratio was 66.7 percent compared to 81.6 percent for the six months ended March 31, 1996. The ratio for the current period is impacted by the inclusion of the results of Tempest. Property catastrophe loss experience is generally characterized by low frequency but high severity short-tail claims which may result in significant volatility in results. For the current six month period, Tempest's loss and loss expense ratio was 11.2 percent. Excluding Tempest, the loss and loss expense ratio would have been 81.0 percent. Several aspects of the Company's operations, including the low frequency and high severity of losses in the high excess layers in certain lines of business in which the Company provides insurance and reinsurance, complicate the actuarial reserving techniques utilized by the Company. Management believes, however, that the Company's reserves for unpaid losses and loss expenses, including those arising from breast implant litigation, are adequate to cover the ultimate cost of losses and loss expenses incurred through March 31, 1997. Since such provisions are necessarily based on estimates, future developments may result in ultimate losses and loss expenses significantly greater or less than such amounts (see "Breast Implant Litigation").
While acquisition costs increased by $1.4 million during the period, the acquisition cost ratio actually decreased from 9.4 percent to 8.0 percent in the current period compared to the same period of fiscal 1996 due primarily to the continuing change in the mix of business written by the Company. Administrative expenses increased by $16.4 million in the current period compared to the six month period ended March 31, 1996. These additional expenses are primarily due to the increased cost base resulting from the strategic diversification by the Company over the past two years, including the recent acquisitions of Tempest, Methuen and ACE London, which account for $7.8 million of the increase, as well as the development of the new insurance lines and products. In addition, during the period, as a result of the increase in the market value of the Company's stock, the Company again recorded expenses related to stock appreciation rights. However, during the period, all remaining stock appreciation rights were exercised in return for options and cash and/or shares of the Company. In addition, certain stock appreciation rights were forfeited in return for cash during the period. Total expenses incurred in the six month period ended March 31, 1997 relating to these transactions amounted to $5.5 million compared with $3.1 million for the six month period ended March 31, 1996. There were no stock appreciation rights outstanding at March 31, 1997.
19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
LIQUIDITY AND CAPITAL RESOURCES
As a holding company, ACE's assets consist primarily of the stock of its subsidiaries as well as other investments. In addition to investment income, its cash flows depend primarily on dividends or other statutorily permissible payments from its Bermuda-based insurance and reinsurance subsidiaries (the "Bermuda subsidiaries"). There are currently no legal restrictions on the payment of dividends from retained earnings by the Bermuda subsidiaries as the minimum statutory capital and surplus requirements are satisfied by the share capital and additional paid-in capital of each of the Bermuda subsidiaries. However, the payment of dividends or other statutorily permissible distributions by the Bermuda subsidiaries is subject to the need to maintain shareholder's equity at a level adequate to support the levels of insurance and reinsurance operations.
The Company's consolidated sources of funds consist primarily of net premiums written, investment income, and proceeds from sales and maturities of investments. Funds are used primarily to pay claims, operating expenses and dividends and for the purchase of investments.
For the six months ended March 31, 1997, the Company's consolidated net cash flow from operating activities was $216.7 million, compared with $313.2 million for the six months ended March 31, 1996. Cash flows are affected by claims payments, which due to the nature of the insurance and reinsurance coverage provided by the Company, may comprise large loss payments on a limited number of claims and can therefore fluctuate significantly. The irregular timing of these large loss payments, for which the source of cash can be from operations, available credit facilities or routine sales of investments can create significant variations in cash flow from operations between periods. For the six month periods ended March 31, 1997 and 1996, loss and loss expense payments amounted to $125.6 million and $40.6 million respectively. However, positive cash flows from operating activities as well as the reinvestment of funds generated by the portfolio did increase the level of investable assets during the period. This increase was offset by unrealized depreciation in the portfolio due to the general decline of both fixed income and equity markets during the period as well as the outflow of funds with respect to the Company's share repurchase program. Total loss and loss expense payments amounted to $101.4 million, $73.1 million and $126.6 million in fiscal years 1996, 1995 and 1994, respectively.
The Company's investment portfolio is structured to provide a high level of liquidity to meet insurance related or other obligations. The consolidated investment portfolio is externally managed by independent professional investment managers and is invested in high quality investment grade marketable fixed income and equity securities, the majority of which trade in active, liquid markets. The Company believes that its cash balances, cash flow from operations, routine sales of investments and the liquidity provided under its committed line of credit (discussed below) are adequate to allow the Company to pay claims within the time periods required under its policies.
The Company has a $50 million committed unsecured line of credit provided by a syndicate of six major international banks, led by Morgan Guaranty Trust Company of New York ("Morgan"). In accordance with the Company's cash management strategy, this facility is utilized when it is determined that borrowing on a short-term basis is advantageous to the Company. The line of credit agreement requires the Company to maintain consolidated tangible net worth of not less than $1.25 billion. There were no draw-downs from the line of credit during the six months ended March 31, 1997 and there were no outstanding borrowings at March 31, 1997. The syndicate of banks have also provided up to (pound)70.3 million (approximately $115 million) for a five year, collateralized letter of credit ("LOC"), which is primarily used to provide funds at Lloyd's to support underwriting capacity on Lloyd's syndicates in which the Company participates. Certain assets, amounting to 115 percent of the value of the LOC, have been pledged as collateral for the LOC. Morgan has served as the issuing bank for the letter of credit.
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
The Board of Directors has authorized the repurchase from time to time of the Company's Ordinary Shares in open market and private purchase transactions. On February 7, 1997, the Board of Directors terminated the then existing share repurchase program and authorized a new program for up to $100.0 million of the Company's Ordinary Shares. During the six months ended March 31, 1997, the Company repurchased 1,504,000 Ordinary Shares under share repurchase programs for an aggregate cost of $89.4 million. As at March 31, 1997, approximately $69.0 million of the Board authorization had not been utilized. During the period April 1, 1997 through May 8, 1997, the Company repurchased an additional 998,500 Ordinary Shares under the share repurchase program for an aggregate cost of $61.0 million, leaving approximately $8.0 million of the February 7, 1997 Board authorization not utilized. On May 9, 1997, the Board of Directors terminated the existing share repurchase program and authorized a new program for up to $300.0 million of the Company's Ordinary Shares.
On October 18, 1996, January 17, 1997 and April 18, 1997, the Company paid quarterly dividends of 18 cents per share to shareholders of record on September 30, 1996, December 29, 1996 and March 31, 1997. On May 9, 1997 the Board of Directors declared a quarterly dividend of 22 cents per share payable on July 18, 1997 to shareholders of record on June 30, 1997. The declaration and payment of future dividends is at the discretion of the Board of Directors and will be dependent upon the profits and financial requirements of the Company and other factors, including legal restrictions on the payment of dividends and such other factors as the Board of Directors deems relevant.
Fully diluted net asset value per share was $40.06 at March 31, 1997, compared with $38.31 at September 30, 1996.

Changes in shareholders' equity during the six months ended March 31, 1997 were (in millions):

Balance at September 30, 1996                        $ 2,244

Net Income for period                                    204
Repurchase of Ordinary Shares                            (89)
Change in net unrealized appreciation
  (depreciation) on investments                          (70)
Dividends declared                                       (21)
Other                                                      4
                                                    ---------
Balance at March 31, 1997                            $ 2,272
                                                     =======	

The Company maintains loss reserves for the estimated unpaid ultimate liability for losses and loss expenses under the terms of its policies and agreements. The ultimate liability is estimated using actuarial and statistical projections. The reserve for unpaid losses and loss expenses of $1.9 billion at March 31, 1997, includes $956 million of case and loss expense reserves. While the Company believes that its reserve for unpaid losses and loss expenses at March 31, 1997 is adequate, future developments may result in ultimate losses and loss expenses significantly greater or less than the reserve provided. A number of the Company's insureds have given notice of claims relating to breast implants or components or raw material thereof that had been produced and/or sold by such insureds. The Company does not have adequate data upon which to anticipate any funding schedule for the payment of these liabilities, and it expects that the amount of time required to determine the financial impact of the options selected by claimants may extend well into 1997 and beyond. Payments may be accelerated for some policyholders in 1997 as a result of settlement of opt-out cases and as additional payments are required to fund Settlement II (see "Breast Implant Litigation").
The Company's financial condition, results of operations and cash flow are influenced by both internal and external forces. Claims settlements, premium levels and investment returns may be impacted by changing rates of inflation and other economic conditions. In many cases or in certain lines of business written by the Company, significant periods of time, ranging up to several years or more, may elapse between the occurrence of an insured loss, the reporting of the loss to the Company and the settlement of the Company's liability for that loss. The liquidity of its investment portfolio, cash flows and the line of credit are, in management's opinion, adequate to meet the Company's expected cash requirements.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Breast Implant Litigation
A number of the Company's insureds have given notice of claims relating to breast implants or components or raw material thereof that had been produced and/or sold by such insureds. Lawsuits, including class actions, involving thousands of implant recipients have been filed in both state and federal courts throughout the United States. Most of the federal cases have been consolidated pursuant to the rules for Multidistrict Litigation ("MDL") to a Federal District Court in Alabama.
On April 1, 1994 the judge presiding over the MDL proceeding gave preliminary approval to a global settlement agreement in the approximate amount of $4.2 billion and conditional certification to a settlement class ("Global I").
On May 15, 1995, the Dow Corning Corporation, a significant participant in the Global I settlement, filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
As of June 1, 1995, over 440,000 registrations were received by the Global I Claims Administrator. Approximately 248,500 of these were filed by domestic class members by the September 16, 1994 deadline for making claims under the Current Disease Compensation Program. Based on an analysis of about 3,000 of these registrations, the judge concluded that a severe racheting (or reduction) of the settlement amounts shown in the notice of settlement would occur if current claims were evaluated under the existing criteria and if funding of the Current Disease Compensation Program remained at the $1.2 billion level.
Because of the anticipated racheting of benefit amounts and the defendants' right to withdraw under the Global I settlement, the judge entered an order on October 9, 1995 declaring that class members had new opt-out rights and that in general class members and their attorneys should not expect to receive any benefits under Global I.
On October 1, 1995, negotiators for three of the major defendants agreed on the essential elements of a revised individual settlement plan for domestic class members with at least one implant from any of those manufacturers ("Settlement II"). In general, under Settlement II, the amounts payable to individual participants, and the manufacturers' obligations to make those payments, would not be affected by the number of class members electing to opt out from the new plan. Also, in general, the compensation would be fixed rather than subject to potential further racheting, and the manufacturers would not have a right to walk away because of the amount of claims payable. Finally, each settling defendant agreed to be responsible only for cases in which its implant was identified, and not for a percentage of all cases.
Participants with implants from one or more of those three defendants who had submitted timely claims under Global I would have two options.
Option One: An amount based on disease criteria and severity levels in the Global I settlement ranging from $10,000 to $100,000. Although substantially less than the amounts shown in the initial notices for Global I settlement, they are greater for many claimants than the amounts that, after racheting, would have been offered under Global I and are not subject to a "walkaway" by defendants because of such opt-outs.
Option Two: A potentially higher benefit based on having or developing during a 15-year period certain diseases that meet more restrictive criteria. The compensation range for persons qualifying under this option is from $75,000 to $250,000. Qualifying claimants would also be eligible for an advance payment of $1,000 under certain circumstances. In general, the maximum total obligation under this 15-year program allocated among the three defendants plus the additional defendants referred to below is $755 million.
Each Current Claimant, regardless of the option selected, would be paid an advance payment of $5,000 and would also be eligible for an additional payment of $3,000 to defray the costs of explantation during that 15-year period should the person choose to do so without regard to the status of any appeals. Current Claimants would be given an extended period of time to identify manufacturers of their implants, to correct any deficiencies in the documentation supporting their prior claims or to provide additional support for claims under the more restrictive criteria.
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Breast Implant Litigation (continued)
By November 13, 1995, Settlement II was approved by the three major defendants. In addition, two other defendants became part of Settlement II, although certain of their settlement terms are different and more restricted than the plan offered by the original three defendants.
On December 22, 1995, the judge approved Settlement II and the materials for giving notice to claimants although an appeal concerning Settlement II is pending with the Eleventh Circuit Court of Appeals. In mid-January 1996, the three major defendants each made a payment of $125 million to a court-established fund as an initial reserve for payments to be made under Settlement II. The Claims Administrator continues to send out notifications of status and advance payments to claimants who submitted implant manufacturer proof. Although Option One closed on December 16, 1996, information on the estimated total cost of Settlement II and the number of opt-outs is not presently available.
Although the Company has underwritten the coverage for a number of the defendant companies including four of the companies involved in the revised Settlement II described above, the Company anticipates that insurance coverage issued prior to the time the Company issued policies will be available for a portion of the defendants' liability. In addition, the Company's policies only apply when the underlying liability insurance policies or per occurrence retentions are exhausted.
Declaratory judgment lawsuits, involving four of the Company's insureds, have been filed seeking guidance on the appropriate trigger for their insurance coverage. None of the insureds have named the Company in such lawsuits, although other insurers and third parties have sought to involve the Company in those lawsuits. To date, one court has stayed a lawsuit against the Company by other insurers; two courts have dismissed actions by other insurers against the Company. Another court in Texas has ruled against the Company's arguments that the court should dismiss the claims by other insurers and certain doctors attempting to bring the Company into coverage litigation there. On appeal in the Texas lawsuit, the appellate court affirmed the lower court's order refusing to dismiss the claims against the Company; further appellate review in the Texas Supreme Court is pending. In addition, further efforts are contemplated to stay or dismiss the doctor's claims against the Company in the Texas lawsuit.
At June 30, 1994, the Company increased its then existing reserves relating to breast implant claims. Although the reserve increase was partially satisfied by an allocation from existing IBNR, it also required an increase in the Company's total reserve for unpaid losses and loss expenses at June 30, 1994 of $200 million. The increase in reserves was based on information made available in conjunction with Global I (including information relating to opt-outs) and information made available from the Company's insureds and was predicated upon an allocation between coverage provided before and after the end of 1985 (when the Company commenced underwriting operations). No additional reserves relating to breast implant claims have been added since June 30, 1994.
The Company continually evaluates its reserves in light of developing information and in light of discussions and negotiations with its insureds. In August 1996, the Company settled with one of its insureds for a sum of money to be paid out over a number of years. The first payment was made in December 1996. The settlement is consistent with the Company's belief that its reserves are adequate. In April 1997, the Company made a payment to another policyholder in the amount of $100 million. Additional limits remain for this insured. This payment was expected by the Company and was included in previous reserves. Significant uncertainties continue to exist with regard to the ultimate outcome and cost of Settlement II and the number and value of the opt-out claims. While the Company is unable at this time to determine whether additional reserves, which could have a material adverse effect upon the financial condition, results of operations and cash flows of the Company, may be necessary in the future, the Company believes that its reserves for unpaid losses and loss expenses including those arising from breast implant claims are adequate as at March 31, 1997.
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
New Accounting Pronouncements
In February 1997, the Financial Accounting Standard Board ("FASB") issued Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("FAS 128"), effective for financial statements issued for periods ending after December 15, 1997. This statement establishes standards for computing and presenting earnings per share ("EPS"). This Statement simplifies the standards for computing EPS previously found in APB Opinion No. 15, Earnings per Share, and makes them comparable to international EPS standards. It replaces the presentation of primary EPS with a presentation of basic EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures, which the Company is considered to have, and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. This Statement requires restatement of all prior-period EPS data presented. The Company anticipates presenting its EPS in compliance with the dual presentation standards mandated by the Statement at December 31, 1997.
The Company has calculated basic and diluted EPS, as defined in FAS 128 and interpreted by the Company based on information currently available, and has determined that such amount do not differ materially from primary EPS, which is reflected in the Company's statement of operations, for the years presented.
24

ACE LIMITED
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
1) On May 9, 1997 the Company declared a divided of $0.22 per Ordinary Share payable on July 18, 1997 to shareholders of record on June 30, 1997.
2) The Board of Directors has authorized the repurchase from time to time of the Company's Ordinary Shares in open market and private purchase transactions. On May 9, 1997, the Board of Directors terminated the then existing share repurchase program and authorized a new program for up to $300.0 million of the Company's Ordinary Shares.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 10.28 - Third Amendment to Equity Linked Incentive Plan Stock Appreciation Rights Plan Exhibit 11.1 - Statement regarding computation of earnings per Share. Exhibit 27.1 - Financial Data Schedule
b) There were no reports on Form 8-K filed during the quarter.
25

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ACE LIMITED

May 13, 1997                              Brian Duperreault
                                  --------------------------------------
                                      Chairman, President and Chief
                                          Executive Officer	

May 13, 1997                             Christopher Z. Marshall
                                  --------------------------------------
                                    Executive Vice President and Chief
                                            Financial Officer	

26

EXHIBIT INDEX

Exhibit
Number         Description                                      Numbered Page
- --------       ------------                                    -------------

10.28          Third Amendment to Equity Linked Incentive
                 Plan Stock Appreciation Rights Plan               28

11.1           Computation of earnings per share                   31

27.1           Financial Data Schedule                             32	

27

THIRD AMENDMENT TO
EQUITY LINKED INCENTIVE PLAN
STOCK APPRECIATION RIGHTS PLAN
WHEREAS, ACE Limited (the "Company") maintains the Equity Linked Incentive Plan - Stock Appreciation Rights Plan (the "Plan"); and
WHEREAS, the Company desires to amend the Plan;
NOW, THEREFORE, IT IS RESOLVED that, by virtue and in exercise of the power reserved to the Company, and the Compensation Committee of the Board of Directors of the Company (the "Committee"), under Paragraph XVIII of the Plan, the Plan is hereby amended in the following particulars:
1. By adding the following to the end of Paragraph X as a part thereof:
"Notwithstanding the foregoing provisions of this Paragraph X, the Committee may permit Options, including Replacement Options, awarded under the Plan to be transferred to or for the benefit of the participant's family (including, without limitation, to a trust for the benefit of a participant's family) subject to such limits as the Committee may establish. In no event shall an Incentive Stock Option be transferable to the extent that such transferability would violate the requirements applicable to such Option under section 422 of the Internal Revenue Code of 1986, as amended."
2. By adding the following new Paragraph XIII-A after Paragraph XIII:
"XIII-A. AWARD OF REPLACEMENT OPTIONS
The Committee may, in its discretion, modify any Right outstanding as of March 31, 1997 to provide that in lieu of continuing to hold the Right, a participant may elect to exercise the Right and be awarded replacement options covering the same number of shares of Company stock as are covered by the Right being exercised, with a per-share exercise price equal to the value of the Company's stock on March 31, 1997 (the "Replacement Options"), subject to the following:
(i) If a Replacement Option elects to have the Rights replaced with Replacement Options, the Rights will become fully vested and automatically exercised as of March 31, 1997.
28

(ii) A Replacement Option will become exercisable on the same date or dates that the Rights would have become or did become exercisable, in accordance with the vesting schedule applicable to the Rights being exercised, as in effect immediately prior to March 31, 1997.
(iii) A Replacement Option will expire on the second anniversary of the Expiration Date applicable to the related Rights being exercised, as in effect immediately prior to March 31, 1997.
(iv) While a Replacement Option is outstanding, the participant will be entitled to dividend awards equal to the number of shares of Company stock subject to the Replacement Option multiplied by the amount of any dividend per ordinary share declared in the sole discretion of the Board of Directors of the Company, without regard to whether the Replacement Option is fully vested; such dividend awards to be paid in cash to the participant on the same date that ordinary share dividends are paid. However, the Committee, in its discretion, may permit a participant to elect receipt of additional options in lieu of receipt of dividend equivalents.
(v) A participant electing to exercise a Right and be awarded a Replacement Option may, at the time such election is made (the "Election Date"), also elect to receive settlement of the Right in cash or shares of Company stock.
(vi) A participant who is subject to United States taxation and who elects to receive settlement of his Rights in cash shall receive such settlement on the Expiration Date of the Rights which would have applied but for his election to exercise the Rights and be awarded Replacement Options; provided however, that on the Election Date, the participant may instead elect to receive such settlement (a) as of the date of his termination of employment or termination of service as a director (regardless of whether such date is earlier or later than the Expiration Date), or (b) as of a date after the Expiration Date.
(vii) A participant who is not subject to United States taxation and who elects to receive settlement of his Rights in cash shall receive such settlement on (or as soon as practicable after) March 31, 1997; provided however, that on the Election Date, the participant may instead elect to receive such settlement as of a date after March 31, 1997.
(viii) If settlement in cash is payable as of a date other than March 31, 1997, the amount of cash settlement determined as of March 31, 1997 will have investment returns elected by the participant, subject to the choices similar to those available under the Company's retirement plans.
29

(ix) A participant electing to receive settlement of his Rights in shares of Company stock shall have the cash amount converted to shares (or share units, as applicable) based on a per-share price of the stock as of March 31, 1997 which is discounted 15% from market value. The participant will be required to hold the shares until the Expiration Date of the Rights being replaced, during which period the participant will be fully vested in the shares, though not permitted to sell the shares.
(x) A participant electing settlement of his Rights in shares of Company stock may defer receipt of such shares, subject to the same rules applicable to deferred receipt of cash settlement. Any dividends payable with respect to stock the receipt of which has been deferred by the participant will be deemed to be reinvested in additional shares of Company stock during the period of deferral, based on 100% of market value of the shares at the time the dividends are paid."
30

EXHIBIT - 11.1

                                               ACE LIMITED AND SUBSIDIARIES
                                             COMPUTATION OF EARNINGS PER SHARE

                                                                   Three Months Ended               Six Months Ended
                                                                        March 31                        March 31
                                                                   1997           1996             1997           1996
                                                                 --------       --------         --------       ------
                                                                        (in thousands, except per share amounts)

Earnings per share - Primary

Weighted average shares outstanding                          57,332,309       46,105,114      57,885,112   46,107,816
Average stock options outstanding (net of repurchased
   shares under the treasury stock method)                      780,130          354,507         715,786      354,507
                                                           ------------     ------------    ------------ ------------

Weighted average shares and share equivalents
outstanding                                                  58,112,439       46,459,621      58,600,898   46,462,323
                                                             ==========       ==========      ==========   ==========

Net income                                                 $     77,949      $    56,803      $  203,690  $   150,339
                                                           ============      ===========      ==========  ===========

Earnings per share                                         $       1.34       $     1.22      $     3.48  $      3.24
                                                           ============      ===========      ==========  ===========

Earnings per share - Assuming full dilution

Weighted average shares outstanding                          57,332,309       46,105,114      57,885,112   46,107,816
Average stock options outstanding (net of repurchased
shares under the treasury stock method)                         841,623          363,585         841,623      363,585
                                                          -------------     ------------    ------------ ------------

Weighted average shares and share equivalents
outstanding                                                  58,173,932       46,468,699      58,726,735   46,471,401
                                                             ==========       ==========      ==========   ==========

Net income                                               $       77,949     $     56,803    $    203,690  $   150,339
                                                         ==============     ============    ============  ===========

Earnings per share                                       $         1.34     $       1.22    $       3.47  $      3.24
                                                      ================    ==============    ============  ===========	

31

ARTICLE 7	

		
PERIOD TYPE	6 MOS	
FISCAL YEAR END	MAR 31 1997	
PERIOD END	SEP 30 1997	
DEBT HELD FOR SALE	3,264,759	
DEBT CARRYING VALUE	0	
DEBT MARKET VALUE	0	
EQUITIES	472,445	
MORTGAGE	0	
REAL ESTATE	0	
TOTAL INVEST	4,121,099	
CASH	87,581	
RECOVER REINSURE	0	
DEFERRED ACQUISITION	31,227	
TOTAL ASSETS	4,713,291	
POLICY LOSSES	1,925,011	
UNEARNED PREMIUMS	382,973	
POLICY OTHER	36,192	
POLICY HOLDER FUNDS	0	
NOTES PAYABLE	0	
PREFERRED MANDATORY	0	
PREFERRED	0	
COMMON	7,100	
OTHER SE	2,264,948	
TOTAL LIABILITY AND EQUITY	4,713,291	
PREMIUMS	323,041	
INVESTMENT INCOME	117,832	
INVESTMENT GAINS	39,384	
OTHER INCOME	0	
BENEFITS	215,440	
UNDERWRITING AMORTIZATION	26,016	
UNDERWRITING OTHER	0	
INCOME PRETAX	203,690	
INCOME TAX	0	
INCOME CONTINUING	203,690	
DISCONTINUED	0	
EXTRAORDINARY	0	
CHANGES	0	
NET INCOME	203,690	
EPS PRIMARY	3.48	
EPS DILUTED	3.47	
RESERVE OPEN	0	
PROVISION CURRENT	0	
PROVISION PRIOR	0	
PAYMENTS CURRENT	0	
PAYMENTS PRIOR	0	
RESERVE CLOSE	0	
CUMULATIVE DEFICIENCY	0