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Life Company Mortgages Return 7.16% in 2014

 

BOSTON - April 1, 2015 – Commercial mortgage investments held by life insurance companies posted an annual return of 7.16 percent in 2014 according to the LifeComps Commercial Mortgage Index. Fourth quarter’s total return was 1.63 percent and followed gains of 0.70 percent in third quarter, 2.23 percent in second quarter and 2.43 percent in first quarter. 

In fourth quarter, income contributed 1.26 percent while price added 0.37 percent. Positive price performance resulted from a downward shift in the Treasury yield curve for terms of 5 years and longer that outweighed the negative effect of higher mortgage spreads. The yield on the 10-year Treasury declined 35 basis points over the last quarter of 2014.

For the twelve-month period, income contributed 5.19 percent and price contributed 1.97 percent. Annual performance likewise received a boost from lower yields on longer-term Treasuries and an overall positive contribution from mortgage spread movement, credit migration and portfolio growth. The yield on the 10-year Treasury fell 87 basis points over the year. 

Of the four major property types, office and apartment loans performed best for the quarter with returns of 1.64 percent compared to 1.59 percent for retail and 1.41 percent for industrial. For the year, retail loans performed best at 7.67 percent followed by apartments at 7.58 percent, office at 6.97 percent and industrial at 5.96 percent.

 

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

Property

Quarter

12 months

Apartments

1.64%

7.58%

Office

1.64%

6.97%

Retail

1.59%

7.67%

Industrial

1.41%

5.96%

All*

1.63%

7.16%

*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 4,600 with an aggregate principal balance of $100.2 billion and market value of $106.7 billion. The weighted average duration is 5.1 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-CREF. For more information, visit www.lifecomps.com.