Life Insurance Commercial Mortgage Index Takes Q4 Tumble

by Phil Hall19 Mar 2020

Life Insurance Commercial Mortgage Index Steeply Drops in Fourth Quarter

Trepp announced a fourth quarter 2019 decline in its LifeComps Index, which benchmarks commercial mortgage investments held by life insurance companies.

During the fourth quarter, the LifeComps Index posted a 0.55 % total return, down dramatically from the 2.20% reading in the third quarter, the 3.11 % level in the second quarter and the 3.15% rate in the first quarter. For 2019 as a whole, the total return was 1.73%.

Multifamily properties saw the strongest performance among the four major commercial property types tracked by Trepp, with a total return of 9.81% over 12 months. The total returns for the other property types were 9.34% for industrial, 9.08% for office and 8.79% for retail. Income contributed 1.10 % and price subtracted 0.55 % in the fourth quarter, which was the first quarter of negative price movement since the third quarter of 2018.

There are approximately 7,500 active loans in the LifeComps Index with an aggregate principal balance of $147 billion, encompassing roughly one-third of the life insurance commercial mortgage market. The weighted average duration is 5.5 years and average reported loan-to-value is 52%.  

“Treasury yields – which move inversely with prices – reversed their downward course slightly in the fourth quarter to generate negative price performance, said Russell Hughes, head of data consortia initiatives at Trepp. “The yield on the 10-year Treasury had climbed up 24 basis points over the quarter. Conversely, in the first quarter of 2020, we see that the coronavirus fears are sending the Treasury headed towards zero. If that steep decline continues, there will be a profound swing back in the Q1 results.”