Life Company Mortgage Returns Fall in Second Quarter 2015

Industrial properties performed the best

BOSTON, Sept. 28, 2015 /PRNewswire/ — Total returns on commercial mortgage loans held by life insurance companies fell 1.23 percent in second quarter 2015 – the first negative quarterly return for mortgages since second quarter 2013. Year to date 2015 performance remained positive at 0.92 percent due to first quarter’s 2.17 percent contribution, according to the LifeComps Commercial Mortgage Loan Index.

Second quarter income return was 1.19 percent while price subtracted 2.42 percent. Higher US Treasury yields and wider spreads both contributed to the price decline. Yields on the 10-year Treasury rose 41 basis points over the quarter to 2.35 percent.

The twelve-month total return dropped to 3.28 percent from 6.90 percent last quarter. Annual income of 5.01 percent was offset by a price loss of 1.73 percent attributable to wider credit spreads that overcame the positive effect of lower yields on longer-term Treasuries. The 10-year Treasury yield ended the period 18 basis points lower.

Of the four major property types, industrial performed best over 12 months with a total return of 3.48 percent followed by office at 3.23 percent, apartments at 3.20 percent, and retail at 3.02 percent.

Commercial Mortgage Loan – Total Return by Property Type as of June 30, 2015
Property                      Quarter                   12 months
Apartments                 -1.47%                     3.20%
Industrial                     -0.47%                     3.48%
Office                          -1.27%                     3.23%
Retail                          -1.41%                     3.02%
All*                              -1.23%                     3.28%
*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 $103.4 billion and market value of $108.3 billion. The weighted average duration is 5.1 years and average reported loan-to-value is 51 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