BOSTON, March 21, 2013 /PRNewswire/ --Commercial mortgage investments held by life insurance companies returned 7.48 percent in 2012. Fourth quarter's total return of 1.85 percent followed gains of 2.31 percent in the third quarter, 1.56 percent in the second quarter, and 1.56 percent in the first quarter, according to the LifeComps Commercial Mortgage Loan Index.
Income contributed 1.39 percent and price contributed 0.46 percent in fourth quarter. Price performance benefitted from tighter mortgage spreads that outweighed the negative effect of higher Treasury yields. Yields on 10-year Treasurys increased 13 basis points over the quarter to 1.78 percent, and yields on five-year maturities increased 10 basis points to 0.72 percent.
For the 12-month period, income contributed 5.64 percent and price added 1.84 percent with annual performance benefitting primarily from mortgage spread tightening, and to a lesser extent, lower Treasury yields. Treasury yields on both five-year and 10-year maturities fell 11 basis points over the year.
Of the four major property types, apartments performed best over 12 months with a total return of 7.94 percent compared to 7.48 percent for retail, 7.18 percent for office, and 6.87 percent for industrial.
Commercial Mortgage Loan – Total Return by Property Type as of Dec. 31, 2012
*Includes hotel, mixed use, and other commercial
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 $92.6 billion and market value of $101.0 billion. The weighted average duration is 4.6 years and average reported loan-to-value is 55 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.