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Life Company Mortgage Returns Fall Back in Third Quarter 2017

 

BOSTON, December 1, 2017 – Returns on commercial mortgage loans held by life insurance companies fell in third quarter 2017, generating a 0.93 percent total return compared with 1.85 percent in second quarter and 1.60 percent in first quarter, according to the LifeComps Commercial Mortgage Index. Year-to-date performance was 4.45 percent.

 

Income contributed 1.10 percent while price subtracted 0.17 percent.  Higher Treasury yields contributed to the price loss as yields on the 5- and 10-year Treasuries rose 31 bps and 9 bps respectively.   The 10-year Treasury ended the quarter at 2.25 percent.  Mortgage spread movement, credit migration and portfolio growth combined made a slight negative contribution.

 

The annual return likewise fell to 1.60 percent from 1.72 percent last quarter.  Income contributed 4.54 percent while price subtracted 2.94 percent. Treasury yields impacted portfolio returns negatively as the ten-year Treasury rose 80 bps over the year.  Credit spreads tightened to partially offset the loss. 

 

Of the four major property types, apartment loans fared best for the quarter with a return of 1.00 percent compared to 0.99 percent for industrial, 0.97 percent for office and 0.69 percent for retail.  For the year, industrial performed best with a return of 2.10 percent followed by office at 1.73 percent, apartments at 1.48 percent and retail at 1.04 percent.

 

 

Commercial Mortgage Loan – Total Return by Property Type
as of <quarter date here>

Property

Quarter

12 months

Apartments

1.00%

1.48%

Office

0.97%

1.73%

Retail

0.69%

1.04%

Industrial

0.99%

2.10%

All*

0.93%

1.60%

*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 $127 billion.  The weighted average duration is 5.5 years and average reported loan-to-value is 50 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.