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Life Company Mortgage Returns Dip in Fourth Quarter 2013

BOSTON, March 28, 2014 /PRNewswire/ -- Commercial mortgage loans held by life insurance companies posted a slight 0.38 percent total return in fourth quarter 2013, down from third quarter's modest performance of 0.99 percent.   Rising treasury yields dampened performance over all quarters. Total return was -1.92 percent in the second quarter and 1.99 percent in the first quarter, according to the LifeComps Commercial Mortgage Loan Index. Total return for the year was 1.41 percent. 

For fourth quarter, income contributed 1.30 percent and price contributed -0.92 percent with the price loss attributable to the upward shift in the treasury yield curve. The yield on the 10-year Treasury increased 40 basis points over the quarter to 3.04 percent.   

The twelve-month total return fell from 2.90 percent at the end of third quarter, continuing its slide from the peak reached mid-year 2010.  Income contributed 5.30 percent and price -3.89 percent. The 10-year Treasury yield ended the year 126 basis points higher.

Of the four major property types, industrial performed best over 12 months with a total return of 3.03 percent followed by office at 1.64 percent, retail at 0.58 percent, and apartments at 0.50 percent.

Commercial Mortgage Loan – Total Return by Property Type as of December 31, 2013

Property

Quarter

12 months

Apartments

0.20%

0.50%

Office

0.35%

1.64%

Retail

0.21%

0.58%

Industrial

0.68%

3.03%

All*

0.38%

1.41%

*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 $96.7 billion and market value of $101.2 billion. The weighted average duration is 4.8 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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