Life Cos. See Stronger Returns on CRE Loans

BOSTON—Life companies' commercial mortgage portfolios posted a 2.43% total return in the first quarter of 2014, improving over Q4 2013's performance of 0.38% while also stronger than the year-ago total return of 1.995%, according to the LifeComps Commercial Mortgage Loan Index released Monday. The data have been collected quarterly from participating insurers since 1996; the Q1 numbers reflect more than 5,000 loans with an aggregate principal balance of $97 billion.

After declining each quarter from its peak reached mid-year 2010, the LifeComps index's 12-month total return improved to 1.84% from 1.41% the previous quarter. Income contributed 5.29%, while price subtracted 3.45% due to an 86-basis-point increase in 10-year Treasury yields from a year ago. 

For Q1, income contributed 1.29% and price added 1.14% after three consecutive quarters of price loss. Performance benefitted from tighter mortgage spreads and lower Treasury yields for maturities of five years and over with the benchmark 10-year Treasury yield declining 31 bps over the quarter to 2.73%. 

Of the four major property types, retail performed best for the quarter, while industrial's performance was best over a 12-month period. Retail's Q1 return stood at 2.68%, compared to 1.28% for the year; while industrial's quarterly return was 1.93% compared to 2.85% for the year. For apartments, quarterly and 12-month returns were 2.51% and 1.24%, respectively; while office turned in numbers of 2.43% for Q1 and 1.93% for the preceding 12 months.

The LifeComps Commercial Mortgage Loan Index is said to be the only published benchmark for the private commercial mortgage market based on actual mortgage loan cash flow and performance data. The weighted average duration of the 5,000-plus loans reported for Q1 is 4.8 years and average reported loan-to-value is 52%. Participating insurers include Allstate Life Insurance Co., CIGNA Investment Management, AXA Equitable, John Hancock, Northwestern Mutual, Principal Financial, Prudential Insurance Co. of America and TIAA.