The Company occupies office space leased from a third party by Hartford Fire Insurance Company ("Hartford Fire"), an indirect subsidiary of The Hartford. Expenses associated with these offices are allocated on a direct and indirect basis to Hartford Life and its subsidiaries by Hartford Fire.
Revenues increased $85 million, or 3%, to $2.9 billion in 1996 from $2.8 billion in 1995. This increase in revenues was primarily a result of increased maintenance and expense fees, in the Investment Products segment, from a larger block of separate account assets, which resulted from strong annuity sales and market appreciation partially offset by a decrease in net investment income and net realized capital gains (losses) of $133 mainly due to losses associated with sales and an other than temporary impairment of Closed Book GRC, see "--Runoff". Expenses increased $176 million, or 7%, to $2.9 billion in 1996 from $2.7 billion in 1995. This increase in expenses is primarily a result of increased interest credited, amortization of deferred acquisition costs and other insurance expenses due to increased sales and higher account values of individual annuity and individual life contracts which were partially offset by a decrease in benefits, claims and claim adjustment expenses of Closed Book GRC and a decrease in policyholder dividends as a result of the elimination of sales of leveraged COLI as a result of the enactment of the HIPA Act of 1996.
account value to 28 basis points in 1996 from 31 basis points in 1995, has contributed to the growth in earnings of $34 million, or 29%, to $150 million in 1996 from $116 million in 1995.
Runoff consists of the Company's closed book of guaranteed rate contracts ("Closed Book GRC") (and the related realized gains and losses) and are products that would be reported as a component of the Investment Products segment if they were part of ongoing operations. The Company also includes in Runoff operations the effects of an insurance guaranty fund adjustment of $10 million in 1995 made to reflect lower than expected insolvencies in the insurance industry. Substantially all of the products included in Closed Book GRC are contracts with guaranteed fixed or indexed rates for a specific period, constituting all GRC written by the Company prior to 1995. The Company continues to write GRC Products only as an accommodation to existing customers or to customers who are purchasing a range of services. Closed Book GRC results have been negatively affected by lower investment rates and earnings in the related investment portfolio (principally composed of mortgage backed securities and collateralized mortgage obligations) due to prepayments experienced in excess of assumed levels in years prior to 1995. Closed Book GRC was also affected by an interest rate rise in 1994 which caused the duration of the Company's assets to lengthen relative to that of its liabilities. Due to the reduced investment earnings and the duration mismatch, the portfolio had insufficient assets to fully fund its liability commitments. During the third quarter of 1996, the Company transferred assets in the amount of $200 million to adequately fund the Closed Book GRC so that future cash infusions would be minimal.
The Company's accounting policy for impairment recognition of investments requires recognition of an other than temporary impairment charge on a security if it is determined that the Company is unable to recover all amounts due under the contractual obligations of the security. In addition, the Company has established specific criteria to be used in the impairment evaluation of an individual portfolio of assets. Specifically, if the asset portfolio supports a runoff operation and is expected to be liquidated prior to maturity to meet liability commitments and has a fair value below amortized cost which will not materially fluctuate as a result of future interest rate changes, then an other than temporary impairment condition has been determined to have occurred. Each individual security within this portfolio is evaluated to determine whether or not it is impaired. Once an impairment charge has been recorded, the Company then continues to review the impaired securities for appropriate valuation on an ongoing basis.
During 1996, Closed Book GRC incurred a $51 million after-tax loss from operations as a result of negative interest spread, as compared with an after-tax loss from operations of $68 million in 1995. With the initiation of the hedge transactions discussed above, which eliminated the possibility that the fair value of Closed Book GRC investments would recover to their current amortized cost, an other than temporary impairment loss of $82 million, after-tax, was determined to have occurred and was recorded in September 1996. An additional other than temporary impairment loss of $6 million, after-tax, occurred in the fourth quarter of 1996, bringing the total impairment to $88 million. Also, during the third quarter of 1996, Closed Book GRC had asset sales resulting in proceeds of approximately $500 million and a realized loss of $55 million, after-tax. The asset sales were undertaken as a result of liquidity needs and favorable market conditions for certain securities. Other charges of $32 million, after-tax, were also incurred in the third quarter of 1996.
In response to the losses associated with Closed Book GRC, the Company instituted an improved risk management process. Management expects that the net income (loss) from Closed Book GRC in the years subsequent to 1996 will be immaterial based on the Company's current projections for the performance of the assets and liabilities associated with Closed Book GRC, the Company's expectations regarding future sales of assets from the Closed Book GRC portfolio from time to time in order to make the necessary payment on maturing Closed Book GRC liabilities and the stabilizing effect of the hedge transactions. In determining the projected Closed Book GRC net income in years subsequent to 1996, the Company assumed that yield spreads implicit in market values would be consistent with historic trends. In addition, the Company assumed that there would be no material credit losses in respect of assets supporting Closed Book GRC. However, no assurance can be given that, under certain unanticipated economic circumstances, which result in the Company's assumptions proving inaccurate, further losses in respect of Closed Book GRC will not occur in the future. To date, such asset sales have been consistent with the Company's expectations.
and $432 million of cash or short-term instruments. Of the $3.6 billion in Closed Book GRC liabilities remaining as of December 31, 1996, the scheduled maturity of such guaranteed rate contracts are as follows: $1.2 billion or 33% in 1997, $1.1 billion or 31% in 1998, $0.8 billion or 22% in 1999 and $0.5 billion or 14% thereafter.