Life Company Mortgage Returns Improve in First Quarter 2014

PR Newswire

BOSTON, July 14, 2014 /PRNewswire/ -- Commercial mortgage loans held by life insurance companies posted a 2.43 percent total return in first quarter 2014, improving over fourth quarter 2013's performance of  0.38 percent, according to the LifeComps Commercial Mortgage Loan Index.

Income contributed 1.29 percent and price added 1.14 percent after three consecutive quarters of price loss.  Performance benefitted from tighter mortgage spreads and lower Treasury yields for maturities of 5 years and over with the benchmark 10-year Treasury yield declining 31 basis points over the quarter to 2.73 percent.   

After steadily declining from its peak reached mid-year 2010, the twelve-month total return improved to 1.84 percent from 1.41 percent last quarter.  Income contributed 5.29 percent while price subtracted 3.45 percent due to an increase in Treasury yields from one year ago.  The 10-year Treasury yield rose 86 bps over the timeframe.  

Of the four major property types, retail performed best for the quarter and industrial performed best for the year.    

Commercial Mortgage Loan – Total Return by Property Type as of March 31, 2014

Property

Quarter

12 months

Apartments

2.51%

1.24%

Office

2.43%

1.93%

Retail

2.68%

1.28%

Industrial

1.93%

2.85%

All*

2.43%

1.84%

*Includes hotel, mixed use, and other commercial

About LifeComps
The LifeComps Commercial Mortgage Loan Index is the only published benchmark for the private commercial mortgage market based on actual mortgage loan cash flow and performance data, which has been collected quarterly from participating life insurance companies since 1996. Active loans in the LifeComps Index number approximately 5,000 with an aggregate principal balance of $97.0 billion and market value of $102.7 billion. The weighted average duration is 4.8 years and average reported loan-to-value is 52 percent.

Since its inception, the LifeComps database has tracked individual cash flows on more than 21,000 loans with principal balances totaling in excess of $280 billion. More than 6,500 loans totaling $100 billion have been tracked from origination to disposition. 

Participating life insurers include Allstate Life Insurance Company, CIGNA Investment Management, AXA Equitable, John Hancock, Northwestern Mutual, Principal Financial,  Prudential Insurance Company of America, and TIAA.  For more information, visit www.lifecomps.com.

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