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Life Company Mortgage Returns Rebound in Third Quarter 2013

BOSTON, Jan. 10, 2014 /PRNewswire/ -- Commercial mortgage loans held by life insurance companies posted a 0.99 percent total return in third quarter 2013, an improvement over second quarter's performance of -1.92 percent but below first quarter's mark of 1.99 percent, according to the LifeComps Commercial Mortgage Loan Index. The year to date return over three quarters was 1.03 percent.

Income contributed 1.32 percent and price contributed -0.32 percent in third quarter. The price return was the second consecutive quarter of price loss and was mainly attributable to higher yields on treasuries with maturities greater than five years. The yield on the 10-year Treasury increased 12 basis points over the quarter to 2.64 percent.   

The twelve-month total return continued to slide from the peak reached mid-year 2010, ending third quarter at 2.90 percent compared to 4.24 percent at the end of second quarter. Income contributed 5.40 percent and price -2.49 percent, with price loss resulting from higher treasury yields that outweighed the positive effect of tighter credit spreads over the period. The 10-year Treasury yield ended the year 99 basis points higher.

Of the four major property types, industrial performed best over 12 months with a total return of 4.27 percent followed by office at 3.10 percent, apartments at 2.48 percent, and retail at 2.11 percent.

Commercial Mortgage Loan – Total Return by Property Type as of September 30, 2013

Property

Quarter

12 months

Apartments

0.77%

2.48%

Office

1.01%

3.10%

Retail

0.77%

2.11%

Industrial

1.44%

4.27%

All*

0.99%

2.90%

*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 $95.7 billion and market value of $101.2 billion. The weighted average duration is 4.7 years and average reported loan-to-value is 53 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.

SOURCE LifeComps

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