Life insurers saw a 68 basis point improvement in returns on their commercial mortgage investments in the first quarter when compared with the fourth quarter, according to the LifeComps Commercial Mortgage Performance Index. But when looked at against the first quarter 2010, returns are 253 basis points down.
For the quarter, the total commercial mortgage loan ROI was 1.72%, compared with 1.04% in the fourth quarter 2010 and 4.25% in the first quarter 2010.
Tighter mortgage spreads offset rising Treasury yields in both the first quarter and fourth quarter 2010, but while that movement ended up in a price return of 25 basis points in the first quarter, there was a loss of 50 basis points for the fourth quarter.
Income return made up the remaining 147 basis points ROI for the first quarter.
The rolling 12-month ROI ended the quarter at 11.87%, down from a peak of 16.65% as of June 30, 2010 and 13.99% as of March 31, 2010.
Income made up 632 basis points of ROI, while appreciation was 555 basis points.
By property type, industrial properties had the best ROI for the first quarter, at 1.98%, followed by office, 1.70%, apartment, 1.61%, and retail, 1.45%.
The best 12-month ROI is from apartments at 13.82%, with retail at 12.42%, industrial at 11.19% and office at 10.17%.
The LifeComps database has over 5,000 loans with an aggregate principal balance of $58.5 billion. There are eight life companies that contribute information to the database, including Allstate, Cigna, AXA Equitable, John Hancock, Northwestern Mutual, Principal Financial, Prudential and TIAA.
