The Company conducts business from various facilities, most of which are leased. In addition, the Company owns its administrative offices in Overland Park, Kansas, Fort Wayne, Indiana, Copenhagen, Denmark and Munich, Germany.
Net premiums written increased $1,163 million or 19% in 1999, primarily attributable to inclusion of a full year of operating activity for the October 1998 acquisitions of GE Re and Medical Protective, the March 1999 acquisition of Eagle Star Re and core growth in various product lines. This increase was partially offset by continued competitive market conditions, an increase in contingently payable ceded premiums relating to recorded recoveries under aggregate excess retrocession programs and the impact of foreign currency translation in connection with the strengthening of the U.S. dollar compared to most major European currencies.
Net premiums written increased $1,439 million or 32% in 1998, primarily attributable to growth in various product lines, including new property and casualty business associated with the acquisition of the renewal rights of business from IRI and Coregis and the acquisitions of Medical Protective and GE Re. This increase was partially offset by three significant quota share life reinsurance contracts obtained in 1997 that did not recur in 1998, the impact of foreign currency translation in association with the strengthening of the U.S. dollar and continued competitive market conditions.
Net earnings increased $131 million or 20% in 1998, including an increase in after-tax net realized gains on investments of $75 million. Excluding after-tax net realized gains on investments, net earnings increased $56 million or 12% in 1998. This increase was primarily attributable to a $75 million increase in net investment income, primarily due to the acquisitions of Medical Protective and GE Re and continued growth in the investment portfolios, and a $47 million increase in other revenues, primarily due to an increase in revenues generated from investment-related life reinsurance products and financial reinsurance transactions. These increases were partially offset by a decrease in underwriting results reflecting increased underwriting and operating expenses associated with the acquisitions and continued competitive market conditions.
Typically, the underwriting performance of property and casualty business is measured in terms of a combined ratio. The combined ratio is the sum of the loss ratio and the underwriting expense ratio, with a ratio lower than 100% indicating an underwriting profit and a ratio greater than 100% indicating an underwriting loss. Although the combined ratio has been greater than 100% for the three years presented above, the operating results of insurance/reinsurance companies include net investment income which generally yields an overall operating profit as reflected above in the caption "Earnings before income taxes, excluding net realized gains on investments."
Net investment income increased $94 million or 22% in 1999, primarily attributable to inclusion of a full year of investment activity in 1999 for the 1998 GE Re and Medical Protective acquisitions. Net investment income increased $30 million or 8% in 1998, primarily attributable to the acquisitions of GE Re and Medical Protective and continued growth in the investment portfolios.
Earnings before income taxes, excluding net realized gains on investments, decreased $115 million or 51% in 1999, primarily attributable to the significant increase in the combined ratio, partially offset by the increase in net investment income discussed above. Earnings before income taxes, excluding net realized gains on investments, increased $32 million or 17% in 1998, primarily attributable to the decrease in the combined ratio discussed above.
Revenues, which consist of net premiums earned, net investment income, net realized gains on investments and other revenues, including fees generated from investment-related life reinsurance products and financial reinsurance transactions, increased $264 million or 17% in 1999. This increase was primarily attributable to growth in the domestic traditional life and credit life business, an increase in net realized gains on investments and fees generated from investment-related life reinsurance products and financial reinsurance transactions. Revenues increased $242 million or 19% in 1998, primarily attributable to growth in the traditional life and credit life business and fees generated from investment-related life reinsurance products and financial reinsurance transactions.
Cash flows from operating activities, which primarily consists of premiums collected during the period in excess of payments made for claims and claim expenses, increased $578 million in 1999. This increase was primarily attributable to a decrease in claim settlements relative to the collection of premiums, somewhat offset by an increase in reinsurance recoverables under the Company's aggregate excess retrocession programs. Cash flows from operating activities decreased $586 million in 1998, primarily attributable to an increase in claim settlements relative to the collection of premiums, the timing of reinsurance settlements in association with catastrophe loss recoverables and an increase in underwriting and operating cash outlays associated with the acquisition of the renewal rights of business from IRI and Coregis and the acquisitions of Medical Protective and GE Re.
Cash flows used for investing activities activities decreased $374 million in 1999, primarily attributable to a reduction in cash used to fund acquisitions in 1999 due to the 1998 acquisitions of Medical Protective and GE Re, somewhat offset by a net increase in the purchases of investment securities. Cash flows used for investing activities decreased $423 million in 1998, primarily attributable to an increase in the maturity and sales of investments, partially offset by the acquisitions of Medical Protective and GE Re.
Cash flows from financing activities decreased $733 million in 1999, primarily attributable to the large amount of 1998 proceeds from short-term borrowings associated with the acquisitions of Medical Protective and GE Re and the change in contract deposit liabilities resulting from the 1998 commutation of a significant financial reinsurance treaty. The $395 million of proceeds from long-term borrowings in 1999 were used largely to repay short-term borrowings made in 1998 under the Company's revolving credit agreement with GE Capital Services. Cash flows from financing activities increased $182 million in 1998, primarily attributable to an increase in the proceeds from short-term borrowings associated with the acquisitions of Medical Protective and GE Re, partially
In addition, the Company has a one-year $600 million revolving credit agreement with GE Capital Services which enables the Company to borrow from GE Capital Services at an interest rate per annum equal to GE Capital Services' cost of funds for a one year period. The agreement is automatically extended for successive terms of one year each unless terminated in accordance with terms of the agreement.
General. The Company follows a conservative investment strategy that emphasizes maintaining a high quality investment portfolio. The primary goals include a growing stream of investment income and improving total investment returns. All investments are administered under guidelines established and approved by the Company's Board of Directors. The Company's guidelines specify credit quality and concentration limits with respect to both fixed maturity and equity securities.
In structuring its fixed maturity portfolios, the Company considers the duration of its assets and claims and claim expense reserves. Most fixed maturity portfolios have total return benchmarks against which relative performance is measured. The total return benchmarks include investment income and realized and unrealized gains and losses on investments. Equity funds are managed for total return and performance is measured against equity benchmarks.
As of December 31, 1999, the fair value of the ERC Frankona Group's investments totaled $7,490 million, an increase of $234 million from December 31, 1998. The composition of ERC Frankona Group's investments is summarized as follows:
The Company manages its exposure to currency principally by matching the underlying reinsurance liabilities with the corresponding assets. Any remaining significant net asset/liability positions in a given currency are hedged with forward currency purchase or sale contracts to further mitigate currency exposures. The Company also hedges its currency risk on a portion of its foreign subsidiary investments by utilizing currency swaps that have been designated to modify currency exposure associated with specific debt instruments.
The property and casualty reinsurance industry has been highly cyclical. Underwriting results of primary property and casualty insurance companies and prevailing general economic and reinsurance premium rates significantly influences demand for reinsurance. The cyclical trends in the industry and the industry's profitability can also be affected significantly by volatile and unpredictable developments, including changes in what the Company believes to be the propensity of courts to grant large awards, natural disasters and other catastrophic events (such as hurricanes, windstorms, earthquakes, floods and fires), fluctuations in interest rates and other changes in the investment environment which affect inflationary pressures that may tend to affect the size of losses experienced by ceding primary insurance companies.