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1/1/2015 - LIFE COMPANY MORTGAGE RETURNS DECLINE IN THIRD QUARTER 2014

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Northwestern Mutual Media Relations
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  mediarelations@northwesternmutual.com


Life Company Mortgage Returns Decline in Third Quarter 2014

 BOSTON, January 1, 2015 – Returns on commercial mortgage loans held by life insurance companies fell in third quarter 2014, posting a 0.70 percent return compared with 2.23 percent in second quarter, according to the LifeComps Commercial Mortgage Index.
 
Income contributed 1.24 percent while price subtracted 0.54 percent.  Wider mortgage spreads and upward movement of the yield curve for Treasuries with terms less than 10 years contributed to the price loss.   The yield on the 10-year Treasury declined one basis point while the yield on the 5-year Treasury climbed 16 basis points over the period. 
 
The twelve-month return declined to 5.84 percent from 6.15 percent in the previous quarter.  Income contributed 5.23 percent and price 0.61 percent.  The price increase stemmed from tighter mortgage spreads over the period that outweighed the negative effect of higher yields on Treasuries with terms less than 10 years.

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


Commercial Mortgage Loan – Total Return by Property Type as of September 30, 2014

Property

Quarter

12 months

Apartments

0.77%

6.05%

Office

0.59%

5.61%

Retail

0.72%

6.21%

Industrial

0.67%

5.19%

All*

0.70%

5.84%

*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 $99 billion and market value of $105 billion. The weighted average duration is 5.0 years and average reported loan-to-value is 51 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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