The company disclosed that about 9 percent, or roughly $10.8 billion, of a $120 billion fixed income investment portfolio was in residential mortgage-backed securities.
NEW YORK (Reuters) - Prudential Financial Inc <PRU.N>, one of the largest U.S. life insurers, said on Thursday it does not expect net credit losses from residential mortgage investments, including subprime, to exceed $400 million over five years.
The company disclosed that about 9 percent, or roughly $10.8 billion, of a $120 billion fixed income investment portfolio was in residential mortgage-backed securities.
Chief Executive John Strangfeld said he sees net credit losses from such investments limited to $400 million in a five-year span.
"We have virtually no CDO exposure," Strangfeld said at an investor conference, adding that he sees this part of the market as the thorniest, expecting that about 90 percent of subprime losses will stem from collateralized debt obligations, or CDOs, bundled investments that were popular with investors in recent years.
!ADVERTISEMENT!Strangfeld said Prudential was on track to record double-digit percentage earnings growth over the next few years.
The company did not revise its view of adjusted operating earnings of $7.50 to $7.80 a share in 2008.
Analysts and investors have fretted over Prudential's exposure to subprime mortgage investments, which is larger than its peers.
"There is value to be had in the high-grade, non-CDO space," Strangfeld said. He said the company's investment in "AA" and "AAA"-rated mortgage investments was expected to eventually prove a "sound investment strategy."
"We think this will play out with the benefit of time," said Strangfeld.
Analysts estimate that subprime mortgage investments have driven more than $300 billion of recent write-downs by banks, insurers and other financial services firms, and see the problem as leading to further losses.
Prudential posted a large drop in earnings in the first quarter, largely as a result of deterioration in the market value of investments, including assets linked to subprime mortgages.
The company's shares have fallen more than 18 percent since the beginning of the year, closing on Wednesday at $74.21. They were up 1.5 percent at $75.32 in early trading on Thursday on the New York Stock Exchange.
(Reporting by Lilla Zuill, editing by Dave Zimmerman)
