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Life insurers' mortgage loan acquisitions dipped in Q3


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Life insurers' mortgage loan acquisitions dipped in Q3

U.S. life insurers acquired nearly $23.45 billion in mortgage loans through their general accounts during the third quarter, but a single company accounted for approximately 16.5% of the dollar value of the overall investment activity.

A review of statutory data finds that Metropolitan Life Insurance Co. acquired mortgages with an actual cost of $3.87 billion during the period, part of the $4.94 billion in acquisitions made by the U.S.-domiciled life units of MetLife Inc.

The MetLife group's activity represented an increase of 41.9% from the year-earlier period and helped boost the statutory statement value of its mortgage loan holdings to an industry-leading $59.79 billion as of Sept. 30 from $58.99 billion three months earlier. Among the top 14 mortgage investors in the U.S. life industry at the group or top-tier level as of Sept. 30, 2015, the MetLife group was one of three to have posted a higher amount of mortgage loan acquisitions in the third quarter of 2016 relative to the year-earlier period.

A review of transaction-level data from Schedule B, Part 2 of the most recent set of quarterly statements finds that Metropolitan Life was responsible for 11 of the 17 largest mortgage loan acquisitions between July 1 and Sept. 30. Those transactions, on a combined basis, had actual cost of $1.77 billion in the aggregate. Metropolitan Life was also responsible for 12 of the 26 mortgage loan acquisitions during the third quarter with actual cost of $100 million or more.

The largest of Metropolitan Life's acquisitions was a deal with actual cost of $234.9 million on a Kern, Calif., property valued at $522.1 million. The nature of the property was listed as "other" in the data. The MetLife group owned numerous long-term agricultural mortgages at year-end 2015 in Kern County, which is in California's San Joaquin Valley and is known for the production of crops such as grapes, almonds, citrus and pistachios. MetLife bills itself as one of North America's largest agricultural mortgage lenders.

The next three largest mortgage investments made by Metropolitan Life during the third quarter involved office properties in Dallas, Chicago and San Francisco.

MetLife reported in its Form 10-Q for the third quarter that its mortgage portfolio on a consolidated basis had net carrying value of $71.16 billion as of Sept. 30, up from $67.10 billion at year-end 2015. Commercial and agricultural mortgages totaled $45.80 billion and $14.14 billion, respectively.

In addition to mortgage lending, Metropolitan Life also added to its commercial real estate position through a September investment of $80.4 million in the Metlife ConSquare Member LLC joint venture.

MetLife revealed Sept. 22 that a joint venture between it and Norges Bank Real Estate Management purchased the Constitution Square Three and Four office buildings in Washington, D.C. Metropolitan Life reported investments with Dec. 31, 2015, carrying value of $570.9 million in limited liability companies with names that correspond to the identities of four other properties in the MetLife/Norges Bank joint venture's portfolio.

Three other U.S. life groups joined MetLife in acquiring mortgage loans with actual cost of $1 billion or more during the third quarter: the group led by New York Life Insurance Co. in addition to the U.S. life units of Prudential Financial Inc. and American International Group Inc.

Teachers Insurance and Annuity Association of America was responsible for the largest mortgage loan acquisition made by an individual U.S. life insurer during the period. TIAA added a $400 million mortgage on a D.C. office property valued at $699 million in August. Commercial Real Estate Direct reported in August that TIAA provided $400 million of mortgage financing for a five-property portfolio owned by Tishman Speyer Properties LP.

The same publication reported in July that AXA Equitable Life Insurance Co. issued a $295 million loan on New York's One Seaport Plaza office building. A $295 million July loan on a New York office property valued at $487.5 million by the AXA unit ranked as the U.S. life industry's second-largest mortgage loan acquisition during the third quarter.

Office properties accounted for 24.7% of the total cost of mortgage loans acquired by U.S. life insurers during the third quarter. Apartments and other multifamily properties represented 22.8% of the total.

All told, net admitted mortgage loans accounted for 10.8% of the life industry's net admitted cash and invested assets as of Sept. 30, up 29 basis points year over year and 11 basis points from June 30.