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Life Insurers' Commercial Mortgages Did Something Strange in Q1

By Allison Bell

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While banks were failing in the first quarter, and stock prices were bobbing up and down, life insurers’ commercial mortgage investments performed… well.

The Trepp Life Comps Total Return Index produced a total return of 2.5% in the first quarter of this year, up from a total value loss of 4.7% in the first quarter of 2022.

Appreciation added 1.4% to the total return in the latest quarter, after subtracting 5.7% from total return in the year-earlier quarter.

But, because of past turmoil, the number of loans in Trepp’s survey results data fell to 7,133, from 7,828, and the total loan balance that the firm tracks fell to $145 billion, from $158 billion.

What It Means

As bond rating analysts and stock analysts grilled life insurance company executives about the state of their investments in commercial mortgages during the first three months of the year, the commercial mortgage assets were making money.

That means that one of the investment engines life insurers use to support your clients’ life insurance policies and annuity contracts was doing its job.

Life Insurers’ Assets

Life insurance policies and annuities are, in effect, two different types of sausage casings for life insurers’ assets.

U.S. life insurers typically invest a large majority of their assets in investment-grade bonds, but according to the National Association of Insurance Commissioners’ Capital Markets Bureau, they also have more than $500 billion in exposure to commercial mortgage loans.

(Image: Andrii Yalanskyi/Adobe Stock)

Allison Bell

Think_Allison

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