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Life Company Mortgages Start 2015 on a Positive

 

BOSTON - June 1, 2015 – Private commercial mortgage investments held by life insurance companies generated a  2.17 percent total return in first quarter 2015 - up from 1.63 percent in fourth quarter 2014, according to the LifeComps Commercial Mortgage Index.   
 
Income accounted for 1.22 percent of total return while price added 0.95 percent in first quarter. The price gain stemmed from falling yields on Treasuries with terms of 2 years and longer.  The yield on the 10-year Treasury declined 23 basis points over first quarter.   Spread movement, however, subtracted from overall performance.   
 
The rolling four quarters return dropped to 6.90 percent from 7.16 percent for fourth quarter 2014.  Income contributed 5.13 percent and price contributed 1.77 percent.  Annual performance likewise benefitted from a decline in Treasury yields on longer maturities that was offset by wider mortgage spreads. The  yield on the 10-year Treasury fell 79 basis points over the year.

Of the four major property types, office loans performed best for the quarter with a return of 2.28 percent compared to 2.26 percent for apartments, 2.12 percent for retail and 1.84 percent for industrial. Over twelve months, apartment loans performed best at 7.32 percent followed by retail at 7.07 percent, office at 6.80 percent and industrial at 5.86 percent.

 

Commercial Mortgage Loan – Total Return by Property Type as of March 31, 2015

Property

Quarter

12 months

Apartments

2.26%

7.32%

Office

2.28%

6.80%

Retail

2.12%

7.07%

Industrial

1.84%

5.86%

All*

2.17%

6.90%

*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 4,600 with an aggregate principal balance of $101.9 billion and market value of $109.4 billion. The weighted average duration is 5.1 years and average reported loan-to-value is 52 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.