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Life Company Mortgages Return 2.03 Percent in Fourth Quarter 2018

 

BOSTON, March 1, 2019 –  Commercial mortgage investments held by life insurance companies posted a 2.03 percent total return in fourth quarter 2018 which followed total returns of 0.15 percent in third quarter, 0.32 percent in second quarter, and -0.77 percent in first quarter, according to the LifeComps Commercial Mortgage Index.   For the year, total return was 1.73 percent.

 

Income contributed 1.13 percent and price added 0.90 percent in fourth quarter, the first quarter of price gain since second quarter 2017. Treasury yields, which had been trending upwards over several quarters, reversed course in fourth quarter to generate the positive price performance.  The yield on the 10-year treasury declined 36 basis points over the quarter.

 

For the year, income contributed 4.48 percent while price subtracted 2.75 percent.  Higher treasury yields over the 12-month period drove the price loss; the yield on the 10-year treasury ended the period 29 bps higher. Spread movement, credit migration and portfolio growth partially offset the price loss.    

 

Of the four major property types, industrial properties performed best over 12 months with a total return of 2.03 percent followed by office at 1.92 percent, apartments at 1.66 percent, and retail at 1.53 percent.

 

Commercial Mortgage Loan – Total Return by Property Type
as of December 31, 2018

Property

Quarter

12 months

Apartments

2.20%

1.66%

Office

2.05%

1.92%

Retail

1.89%

1.53%

Industrial

1.95%

2.03%

All*

2.03%

1.73%

*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 7,400 with an aggregate principal balance of $141 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, Symetra and TIAA.  For more information, visit www.lifecomps.com.