Both men left Real Madrid at the end of last season, with Ancelotti taking the Selecao job and Modric joining Milan.
Ancelotti, a former Milan coach, says he's unsurprised by Modric's impact with the Rossoneri.
He told La Gazzetta dello Sport: "I'm delighted that he's remaining at such a high level, and that's not surprising at all. I knew he'd do well because he's aiming for the World Cup, he plays once a week, and last year, in my Madrid, he was the only player who didn't miss a single training session.
"How does he do it? Genetics and professionalism, it's simple. He's still one of the best midfielders around. I've read that there's talk of another year on his contract; he can do it without any problems."