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New York Life sees positive cash flow in 2002

Leading US life insurer New York Life expects a cash surplus in 2002 despite losses of up to $700 million from corporate bond and equity investments, its chief executive said on Wednesday.

"We owned WorldCom, we owned Enron, we owned Tyco...We have taken about $350 million in losses in bonds and we've taken about the same amount in the stock market," Sy Sternberg, chief executive officer of New York Life Insurance Co said.

Over 65 per cent of the assets of New York Life, the biggest mutual life insurer in the United States, are invested in corporate bonds and four percent in equities.

"The good news is our earnings are so strong we will probably end this year with more surplus than we began it," Sternberg told a news conference on a visit to the firm's Indian unit.

"Our earnings are over $800 million and this year we've some additional tax savings, so it's probable we'll have positive cash flow of at least $200 to $300 million to add to our surplus."

New York Life, which has $178 billion in assets under management, will see total revenue jump eight percent to $13 billion, he said.

In March, New York Life Insurance reported net income of $1.086 billion for 2001, down from $1.205 billion the year before as it was hit by investment losses.

He said the US insurance industry had been hurt by the erosion of its large investments in troubled telecoms companies and some corporate bankruptcies and he expected the sector to remain on ratings watch for at least for the next 12 months.

Sternberg said he sees India and China as New York Life's two most attractive future markets. Only about a quarter of India's insurable population of 300 million holds a policy.

New York Life owns a 26 per cent stake in its local Indian unit, Max New York Life Insurance Co Ltd, which began operations 18 months ago after India opened its insurance industry to private companies after decades of state control.

Foreign insurance firms can hold a maximum 26 per cent stake in a local venture under Indian law. The New Delhi-based Max India group holds the remaining 74 per cent.

Sternberg said he would consider raising the company's stake in its Indian unit to 50 per cent if India removed curbs on equity holdings by foreign companies.

Max New York Life is also interested in entering India's pension fund and health insurance fields but wants a clearer regulatory environment before it does so.

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