UPDATE 2-Swiss insurer Ace profit rises in 3rd-qtr

* Ace posts higher Q3 profit

* Underwriting gains help offset lower policy sales

* Operating share profit beats analysts' expectations

(Adds financial detail, analyst comment, byline)

By Lilla Zuill

NEW YORK, Oct 27 (Reuters) - Swiss insurer Ace Limited (ACE.N) said on Tuesday it posted a higher quarterly profit because of strong underwriting income and a decline in payouts linked to U.S. hurricanes.

On an operating basis, the results beat Wall Street expectations.

"ACE is proving itself to be a reliably solid company," said Hexagon analyst David Havens, in an email after the results. "Profitability has been strong, underwriting results solid, investment missteps have been avoided, and capital has remained sound.

Ace's third-quarter net profit rose to $494 million, or $1.46 a share, from $54 million, or 16 cents a share, in the year-ago period.

Operating earnings, which exclude investment gains or losses, were equal to $2.07 a share, beating analysts average execrations of $1.97 per share, according to Thomson Reuters I/B/E/S.

Net realized and unrealized gains in the quarter were $1.4 billion, helping to boost book value, a key investor measure of an insurer's valuation.

Ace's book value rose to $55.71 per share, up 13 percent from the end of June.

Policy sales declined along with investment income.

Ace's conservative investment approach helped it fare better through the credit crisis than many peers, avoiding the investment mistakes that hurt American International Group Inc (AIG.N) and Hartford Financial (HIG.N).

Ace shares closed down 16 cents in the regular session at $53.27. The stock has traded in a range between $30.92 and $59.36 over the past year.

The insurer, headquartered in Zurich, Switzerland, sells to clients in 140 countries.