U.S. life insurers’ 2010 commercial mortgage loan performance favorably exceeded Fitch Ratings’ http://www.fitchratings.com expectations. Approximately 99.6% of mortgage loans held by U.S. life insurance companies were in good standing at Dec. 31, 2010, a level similar to year-end 2009. The loans posted actual realized losses of $1.36 billion (0.5% of total adjusted capital) in 2010, which was below the rating agency’s expectations of up to $3 billion in losses and was a modest decline from $1.41 billion in losses realized in 2009. Fitch believes that mortgage loan performance has benefited from increased liquidity and continued low interest rates.

While Fitch believes there are inconsistencies among companies’ mortgage loan loss recognition practices, and actual losses and troubled mortgages reported are likely understated, the firm does not believe the distortion to overall loss experience for the industry is material. Based on an analysis of recent loss experience and a nascent recovery in the commercial real estate market, Fitch’s concern over the industry’s loss exposure to mortgage loans has moderated.

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