Returns on private commercial mortgage investments owned by life insurance companies rebounded from fourth-quarter 2016’s loss of 2.72% to generate a total return of 1.6% in the first quarter of 2017, according to the LifeComps Commercial Mortgage Index.
Income contributed 1.12%, while price added 0.48%. Price return benefited from Treasury yield-curve movement and other valuation factors, including spread movement, credit migration and portfolio growth. The yield curve shifted upward for terms under three years, while the benchmark 10-year Treasury fell five basis points over the quarter to 2.4%.
The 12-month total return fell to 2.15% from 3.94% in the prior quarter, as first quarter 2016 rolled out of the calculation. Annual income of 4.62% was countered by price return of -2.47%. Higher Treasury yields and other valuation factors hindered annual price performance. The 10-year Treasury yield ended the period 62 basis points higher.
Of the four major property types, apartment loans fared best for the quarter, with a return of 1.74%, compared to 1.59% for retail and 1.49% for both office and industrial. For the year, industrial performed best, with a return of 2.29%, followed by apartments, at 2.24 percent, office at 2% and retail at 1.95%.
Participating life insurers include Allstate Life Insurance Co., CIGNA Investment Management, AXA Equitable, John Hancock, Northwestern Mutual, Principal Financial, Prudential Insurance Co. of America, Sun Life and TIAA.
