The commercial mortgage loan that is being held by life insurance companies has bounced back from a negative 1.23 percent performance in the second quarter of 2015 to a 1.62 percent total return in the third quarter of 2015, according to the LifeComps Commercial Mortgage Loan Index.
According to the press release of Northwestern Mutual in PR NewsWire, the Price Return in the third quarter of 2015 was 0.41 percent, while the Income Return was at 1.21 percent. The increase in value was due to the lower yields on Treasuries with terms over two years that compensates for the negative effect of wider mortgage spreads. There is a decline of 29-basis point on the 10-year Treasury Yield in the third quarter.
The LifeComps Index for the Third Quarter of 2015 also reported that the twelve-month total return have increased from 3.28 percent from the last quarter to 4.23 percent. The 4.98 percent Annual Income was counterbalanced by the 0.75 percent Price Loss, which can be attributed to the wider credit spreads that drove values down despite lower yields on longer term Treasuries.
The LifeComps IndexTM is a unique historic commercial mortgage loan investment performance index created in 1997 for the life insurance industry, to serve as a benchmark for privately held commercial mortgage whole loans. The index uses Modified Dietz methodology to calculate the total return, and publishes it in a quarterly basis. The LifeComps Commercial Mortgage Loan Index is being participated by well-known life insurance companies that includes the Allstate Life Insurance Company, CIGNA Investment Management, AXA Equitable, John Hancock, Northwestern Mutual, Principal Financial, Prudential Insurance Company of America, and TIAA-CREF.
Active loans in the LifeComps Index number is approximately 4,500 with an aggregate principal balance of $103.7 billion and a market value of $108.9 billion. The weighted average duration is 5.2 years and the average reported loan-to-value is 50 percent.