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PRIVATE MORTGAGE PERFORMANCE DOWN 3.2% IN FOURTH QUARTER 2008
Annual total return negative for first time in LifeComps 12 year history
BOSTON, March 31, 2009 – Returns on private commercial mortgages held by life insurance companies dipped farther into negative territory in fourth quarter 2008, posting a -3.16 percent total return according to the LifeComps Commercial Mortgage Index. Fourth quarter’s negative return was the largest in LifeComps’ 12 year history and followed returns of -2.06 percent in third quarter, 0.26 percent in second quarter and 0.82 percent in first quarter.
Of total return in the fourth quarter, 1.61 percent was income return and -4.77 percent was price return. The price loss was driven by higher mortgage spreads and lower valuations which overrode the positive effect from lower treasury yields.
For the year, total return was - 4.14 percent which represents the first time the annual total return was negative in LifeComps’ history. Income return was 6.45 percent and price return was -10.59 percent.
Apartment returns were hit hardest in fourth quarter with a -4.95 percent return followed by office at -2.65%, retail at -2.39% and industrial at -2.21%. For the year, apartment returns were -6.35% compared to -3.51% for retail, -3.21% for office and -3.13% for industrial.
|Commercial Mortgage Loan
Total Return by Property Type as of 12/31/08
The LifeComps Commercial Mortgage Index is the only published benchmark for the private commercial mortgage market based on actual cash flow data, which has been collected quarterly from participating life insurance companies since 1996. Active loans in the LifeComps Index number 6,600 with an aggregate principal balance of approximately $85.6 billion and market value of $78.1 billion. The weighted average duration is 4.2 years, and average loan-to-value is 59.8 percent.
Since its inception, the LifeComps database has tracked individual cash flows on more than 11,500 loans with principal balances totaling in excess of $155 billion. More than 4,600 loans totaling $61 billion have been tracked from origination to disposition.
Participating life insurers include Allstate Life Insurance Company, CIGNA Investment Management, The Equitable, John Hancock, Nationwide, Northwestern Mutual, Principal Financial and Prudential Insurance Company of America. For more information, visit www.lifecomps.com.