Life Company Mortgage Returns Up In Third Quarter 2012

Jan 30, 2013, 10:15 ET from LifeComps Commercial Mortgage Loan Index

BOSTON, Jan. 30, 2013 /PRNewswire/ -- Private commercial mortgage loans held by life insurance companies generated a total return of 2.31 percent in the third quarter of 2012, an improvement over the 1.56 percent return achieved in each of the first two quarters, according to the LifeComps Commercial Mortgage Performance Index.

Income returns were 1.37 percent and price return was 0.94 percent. Tighter mortgage spreads and slightly lower Treasury yields both contributed positively to price performance with spread movement contributing to the greater extent. The 10-year Treasury yield ended the quarter just two basis points lower at 1.65 percent while the five-year Treasury declined 10 basis points to 0.62 percent.

Despite the improved quarterly performance, the annual return for the LifeComps portfolio fell to 8 percent from 8.41 percent at the end of second quarter. Income contributed 5.68 percent and appreciation 2.32 percent with performance driven by lower Treasury yields. Treasury yields for 10-year maturities declined 27 basis points from 1.92 percent over the 12-month period. 

Of the four major property types, retail performed best over 12 months with a total return of 8.18 percent compared to 8.07 percent for apartments, 7.79 percent for office, and 7.17 percent for industrial. 

Commercial Mortgage Loan

Total Return by Property Type as of Sept. 30, 2012

Property

Quarter

12 months

Apartments

2.37%

8.07%

Office

2.15%

7.79%

Retail

2.60%

8.18%

Industrial

1.93%

7.17%

All*

2.31%

8.00%

*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 5,000 with an aggregate principal balance of $93.6 billion and market value of $101.6 billion. The weighted average duration is 4.5 years and average reported loan-to-value is 57 percent.

Since its inception, the LifeComps database has tracked individual cash flows on more than 18,000 loans with principal balances totaling in excess of $221 billion. More than 3,800 loans totaling $54 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. For more information, visit www.lifecomps.com.

SOURCE LifeComps Commercial Mortgage Loan Index

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