U.S. Life Insurers Shift to Residential Mortgages in Investment Portfolios
The U.S. life insurance industry has significantly increased its investment in mortgage whole loans, reaching a record $787.30 billion in book value in 2024, representing nearly 14.0% of general account cash and invested assets. Notably, investments shifted from traditional commercial loans to residential mortgages, which accounted for 14.5% of whole-loan positions by the end of 2024, a substantial rise from 4.6% five years earlier. Residential mortgage loan acquisitions more than quadrupled in aggregate cost over this period and increased by 50.7% in 2024 alone to $48.23 billion.
This portfolio evolution has extended the weighted-average duration of mortgage investments and increased loan-to-value ratios, reflecting the characteristics typical of residential loans. The credit quality of these mortgage assets shows slight deterioration, with delinquency rates for uninsured residential mortgages at 4.57%, considerably higher than other mortgage types held by insurers. Also, the proportion of loans with loan-to-value ratios above 81% grew to 9.8% in 2024 from 2.9% in 2019.
The trend of increasing residential mortgage investments appears to be secular, supported by the rise of mortgage aggregators targeting insurer general accounts. The largest acquirers in 2024 were the U.S. life subsidiaries of Athene Holding Ltd., with $16.11 billion in uninsured residential mortgage acquisitions and holdings of $30.54 billion. Other significant investors included Global Atlantic Financial Group Ltd. and Corebridge Financial Inc., holding $19.88 billion and $10.93 billion, respectively.
Several insurers have dramatically rotated their portfolios, favoring residential mortgages over different commercial real estate sectors. For example, National Life Insurance Co.'s Life Insurance Co. of the Southwest increased its residential property exposure from 3% to 20% of real estate debt and equity in 2024. Similarly, smaller players like Aspida Life Insurance Co. and new entrants such as AuguStar Life Insurance Co. and Pacific Life Insurance Co. have expanded their residential mortgage loan programs.
Percentage allocations to residential mortgages vary widely among insurers active in this asset class, ranging from low single digits to above 30% of invested assets. Some companies purchase mortgages exclusively from affiliated entities, reflecting direct ties with mortgage originators or aggregators. Despite the growth, many large insurers still hold sizable portfolios of nonresidential mortgage loans with no residential exposure, indicating potential for further expansion in residential mortgage allocations.
The shift towards residential mortgages yields higher effective interest rates, with uninsured residential loans averaging 6.08% at year-end 2024 compared to 4.80% for commercial mortgages. Additionally, residential mortgages in good standing attract lower risk-based capital charges (0.68%) than highly rated commercial loans (0.90%), providing capital efficiency advantages.
These evolving investment dynamics have important implications for underwriting, risk management, and capital deployment strategies within the U.S. life insurance sector. Increased exposure to residential real estate may introduce new credit risk profiles and require adjustments in insurer asset-liability management frameworks.
Industry stakeholders should monitor credit performance indicators, loan-to-value trends, and regulatory developments as residential mortgage investments become a larger component of insurer portfolios. This transformation underscores the need for continued analytical rigor in assessing portfolio composition and investment strategy effectiveness amid shifting market conditions.