Driven by growing COVID-19 related credit concerns, commercial mortgage investments held by life insurance companies posted a -1 % negative return for the first quarter, according to a Trepp LifeComps report released this week.
The total returns on those commercial investments is down significantly from a 0.55 % return on commercial loan investment portfolios for the fourth quarter of 2019, according to Trepp, a leading provider of information analytics and technology for structured finance, commercial real estate, and banking markets.
The total value of approximately 7,600 active commercial real estate loans held by life insurance companies dropped by $3 billion in just three months from $154.5 billion, to $151.5 billion, Trepp reported.
The decrease is small relative to life insurers’ total asset base: U.S. life insurers control about $7 trillion in assets.
- A copy of the Trepp LifeComps report is available here.
- An earlier article about LifeComps data is available here.
Trepp said the negative price appreciation was “primarily being driven by credit risk.”
The loans are tracked in Trepp’s Commercial Loan Index — a benchmark for the private commercial mortgage market based on mortgage loan cash flow and performance data. The data is collected quarterly from participating life insurers.
The average quarterly return for loans in the LifeComps index since 2000 has been 1.6%, according to Russell Hughes, head of data consortia initiatives at Trepp.