January 29, 2019
The CRE Finance Council (CREFC) and Trepp, LLC shared preliminary results of the CREFC & Trepp Insurance Company Investment Performance Survey for the first-half of 2018. Based on the most recent data available, the biannual survey tracks the performance of commercial mortgage investments across 23 insurance companies with a combined $218 billion in loan exposure.
CREFC’s Lisa Pendergast says, “Our bi-yearly survey showcases how life company portfolio lenders are performing, and collectively we’re happy to see another strong performance for the first half of 2018.”
Insurance companies reported continued strong performance and increased allocations to commercial mortgages during the first-half of 2018. Among the H1 2018 survey findings were:
- Mortgage Exposure Held: Commercial mortgage holdings averaged 11.94% of total invested assets. This was a 22-basis point increase from year-end 2017, indicating increased allocations to commercial mortgages. Individual company holdings ranged from a high of 18.11% to a low of 4.57%.
- Total Realized Net Losses: Insurance company loan portfolios continue to experience lower losses and perform better than the commercial mortgage-backed securities (CMBS), but experienced slightly higher losses for the first time when compared to the commercial bank sector loans, since 2011. Realized net losses in the general accounts and subsidiary entities of survey participants totaled 0.03%. In contrast, CMBS and commercial banks experienced losses of 0.37% and 0.02%, respectively, as of the first-half of 2018.
- Delinquencies: Total insurance company loan delinquencies (30 days or greater) averaged 0.01%, same as from year-end 2017.
- Problem Loans: The percentage of problem loans (90 or more days delinquent) slightly increased. Problem loans totaled 0.003%, up about two basis points from year-end 2017. However, the delinquency rate for the insurance sector continues to remain low compared to CMBS and banks, with rates at 3.85% and 0.50%, respectively, for the same period.
- Other Portfolio Statistics: The average loan-to-value (LTV) ratio on loans increased to 53.73% from 53.17% at year-end 2017. Only 0.1% of the loan exposures had an LTV ratio greater than 100%. The average debt service coverage ratio (DSCR) for the portfolios was 2.15x as of Q2 2018, down by 1 basis point over the year-end 2017.
- New Originations: Survey participants added $21.38 billion of new mortgages in first-half 2018, which is about the same compared to the year-earlier level (as of Q2 2017). The property type distribution for new originations indicated maximum increases in office and mixed use exposures with a decrease in retail exposure.
For comments, questions or concerns, please contact Dennis Kaiser