WASHINGTON, DC—Results are in from the latest semiannual Portfolio Lender Survey of insurance company investment performance conducted by the CRE Finance Council and Trepp LLC. The pattern that emerges when looking back over survey results from previous years is one of stability and reliability.

"These results provide clear evidence of extremely solid investment performance within insurance company portfolios," Todd Everett, chair of CREFC's portfolio lenders insurance company sub-forum, observed in early 2013, when the survey covered performance from the first two quarters of 2012. Managing director and head of real estate fixed income at Principal Real Estate Investors, Everett continued, "They also demonstrate the reasons we are seeing increasing allocations in commercial mortgages from this sector. The lowering level of losses and minor levels of high risk seem to indicate that insurance companies are benefitting from the recovery in real estate fundamentals."

Three years later, the newest results are comparable. Insurers' allocations to commercial mortgages showed a slight increase for the first six months of 2015 compared to year-end 2014, while the delinquency rate among these mortgages is bested only by Fannie Mae and Freddie Mac, according to recent figures from the Mortgage Bankers Association.

Commercial mortgage holdings averaged 10.86% of total invested assets for survey participants this time around, up 18 basis points from six months earlier, according to CREFC and Trepp. Individual insurers' holdings ranged from a high of 18.14% to a low of 2.05%. The numbers, according to CREFC and Trepp, indicate "stable allocations to commercial mortgages by the insurance companies."

CREFC and Trepp say insurance companies experienced lower losses and continue to perform better than CMBS and commercial banks—consistent with three years earlier. The total realized net losses in the general accounts and subsidiary entities of survey participants were recorded at 0.03% as of Q2 of last year, representing a slight drop from a year ago, when losses were measured at 0.04%. In comparison, CMBS and commercial banks experienced losses of 0.41% and 0.06%, respectively, during the same time period. 

Total loan delinquencies also decreased during the first half of '15 when compared to year-end '14. Delinquencies recorded by survey participants averaged 0.09% during the first half of last year, down 0.07% from six months prior. Most of the delinquencies reported as of this past June 30 fell into the 90+ days delinquent category.

Insurers' delinquency rate on commercial mortgages compares to 0.82% for banks and 4.84% during Q3 of last year, according to MBA figures issued last month. Only Fannie, at 0.05%, and Freddie, at 0.01%, came in lower, according to MBA.

Moreover, CREF and Trepp say the average reported portfolio loan-to-values and debt service coverage ratios have consistently improved in recent years for mortgages held by insurance companies. The average LTV ratio held within participating company portfolios was 55.3% at year-end '14.  About 0.9% of loan exposure for all companies had a LTV ratio greater than 100%.

Twenty-three insurance companies, the highest participation rate to date, contributed data from their general accounts for the first half of '15. Participants hold a combined $189 billion in commercial mortgage assets, representing more than half of the industry's total mortgage exposure. They also submitted data from subsidiaries in order to fully capture performance of any sub-performing or non-performing loans in these entities.