Revenues decreased 8% in 1996, due primarily to lower life insurance revenues. These lower life insurance revenues resulted from certain reinsurance and assumption agreements which the Company entered into on December 31, 1995 and January 1, 1996, primarily with one reinsurer, whereby assets and liabilities related to certain life and annuity insurance policies, primarily universal life and investment-type contracts and credit life and accident and health, were ceded to the reinsurer. The reinsurance agreements are part of several other agreements which have collectively resulted in a substantial reduction in the Company's life insurance operations. The effect on income before taxes and net income from these agreements was not material. (See Note F of Notes to Consolidated Financial Statements.) Revenues increased 39% in 1995, due primarily to greater loan interest and fee revenue attributable to the significant growth in the average loan portfolios of the real estate lending and commercial finance operations to $1.5 billion in 1995 from $1.1 billion in 1994. The average loan portfolio further grew to $1.6 billion in 1996.
Interest rate sensitivity data for the Company's financial services operations as of December 31, 1996 is presented in the table below. The relationships shown are for one day only and significant changes can occur in the sensitivity relationships as a result of market forces and management decisions. The interest rate gaps reported in the table arise when assets are funded with liabilities having different repricing intervals and to this
Included in the reserves established with portfolio acquisitions in 1994 is $3.2 million in reserves relating to a $225 million commercial real estate loan portfolio acquisition by the Company's thrift and loan which was completed in August 1994.
On March 1, 1996, Fremont General Financing I, a statutory business trust (the "Trust") and consolidated wholly-owned subsidiary of the Company, sold $100 million of 9% Trust Originated Preferred Securities(SM) ("the Preferred Securities") in a public offering. The Preferred Securities represent preferred undivided beneficial interests in the assets of the Trust. The proceeds from the sale of the Preferred Securities were invested in 9% Junior Subordinated Debentures of the Company ("the Junior Subordinated Debentures"). The proceeds from the sale of the Junior Subordinated Debentures were used to repay approximately $50 million in revolving bank line of credit indebtedness, with the remainder used for general corporate purposes. The $100 million Junior Subordinated Debentures are the sole asset of the Trust. The Preferred Securities will be redeemed upon maturity of the Junior Subordinated Debentures in 2026, subject to the election available to the Company to extend the maturity up to 2045, and they may be redeemed, in whole or in part, at any time on or after March 31, 2001 and under certain specified circumstances. The Junior Subordinated Debentures rank pari passu with the Company's $301,245,000 aggregate principal amount at maturity of Liquid Yield Option(TM) Notes due 2013, and subordinate and junior to all senior indebtedness of the Company. Payment of distributions out of cash held by the Trust, and payments on liquidation of the Trust or the redemption of the Preferred Securities are guaranteed by the Company.
Net cash provided by (used in) investing activities increased to $229.8 million in 1996 from $(514.0) million and $(551.1) million for 1995 and 1994, respectively. The increase in net cash provided by (used in) investing activities in 1996 as compared to 1995 is due principally to a decrease in investment purchases, net of sales, maturities, and calls; the February 1995 purchase of Casualty for a net cash disbursement of $255.8 million; and an increase in receipts from repayments of loans. These conditions were partially offset by an increase in loan originations. The significant decrease in short-term and other investments of $376.0 million and the significant level of securities purchased in 1995, was due primarily to the effects of investing the acquired short-term investment portfolio of Casualty into long-term securities. Net cash provided by (used in) investing activities increased in 1995 as compared to 1994, due primarily to a decrease in bulk loan purchases, net of loan repayments, in the real estate lending operation. This net decrease is due in part to $366 million in bulk commercial real estate loan purchases which the Company completed in 1994. The decrease in net loan purchases was offset partially by the acquisition of Casualty and an increase in investment purchases, net of sales, maturities, and calls.
Also, in 1995, the FASB issued Statement 123 ("FASB 123"), "Accounting for Stock-Based Compensation" that is effective for fiscal years beginning after December 15, 1995. FASB 123 establishes a method of accounting for stock-based compensation that is based on the fair value of stock options and similar instruments and encourages, but does not require, adoption of that method. The Company has elected to continue following Accounting Principles Board Opinion No. 25 for measuring compensation cost. Pursuant to FASB 123, the Company will disclose pro forma net income and earnings per share calculated as if the recognition and measurement provisions of the new standard had been adopted; however, for 1996, the pro forma effect was not material.