Fitch: CRE Delinquencies Likely to Increase for Life Companies

Life companies are likely to report material increases in credit related losses due to their commercial mortgage holdings this year and next, said Fitch Ratings, Chicago. During 2009, there were realized losses on directly placed mortgages with life companies totaling $1.5 billion. For the entire down cycle, Fitch's base case loss projections are approximately $6 billion. This, the rating agency said, implies additional losses on commercial mortgages of between $4 billion and $5 billion during 2010 and 2011. Fitch points out that 99.6% of the mortgage loans held by life insurers are in good standing as of Dec. 31, 2009, a significantly better performance than the commercial mortgage-backed securities market and mortgages held by banks. "While Fitch believes that reported rates of mortgage loan delinquencies, foreclosures and restructurings may be a less meaningful measure of performance in this cycle due to increased active management of mortgage loan portfolios (i.e., loan sales), these traditional performance measures are expected to show a significant deterioration in 2010 and 2011," the rating agency said.