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Life Company Mortgage Returns Climb in Second Quarter 2017

 

BOSTON, September 1, 2017 – Commercial mortgage loans held by life insurance companies returned 1.85 percent in second quarter 2017, up slightly from first quarter’s total return of 1.60 percent, according to the LifeComps Commercial Mortgage Loan Index.  Year-to-date performance was 3.48 percent.

 

Income contributed 1.13 percent while price added 0.72 percent for the quarter.  Treasury yields declined some for maturities of five years and above with the ten-year Treasury falling 9 basis points to 2.31 percent.   The shift in the Treasury yield curve along with other market factors boosted second quarter performance. 

 

Despite the gains in first half 2017, the annual return fell to 1.72 percent from 2.15 percent last quarter as stronger performance from 2016 rolled out of the calculation.  Income contributed 4.57 percent while price subtracted 2.85 percent. Higher treasury yields impacted portfolio returns negatively as the ten-year Treasury rose 82 bps over the year.  Credit spreads tightened to partially offset the loss. 

 

Of the four major property types, office loans fared best for the quarter with a return of 1.95 percent compared to 1.89 percent for apartments, 1.71 percent for retail and 1.57 percent for industrial.  For the year, industrial performed best with a return of 1.87 percent followed by apartments at 1.83 percent, office at 1.71 percent and retail at 1.30 percent.

 

Commercial Mortgage Loan – Total Return by Property Type
as of June 30, 2017

Property

Quarter

12 months

Apartments

1.89%

1.83%

Office

1.95%

1.71%

Retail

1.71%

1.30%

Industrial

1.57%

1.87%

All*

1.85%

1.72%

*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 5,300 with an aggregate principal balance of $125 billion. The weighted average duration is 5.5 years and average reported loan-to-value is 51 percent.

Participating life insurers include Allstate Life Insurance Company, CIGNA Investment Management, AXA Equitable, John Hancock, Northwestern Mutual, Principal Financial, Prudential Insurance Company of America, Sun Life, and TIAA.  For more information, visit www.lifecomps.com.