Total revenues increased only $85 million (1%) in 2002. The modest increase in 2002 revenues was principally driven by the growth in net premiums earned discussed above being largely offset by a decrease in investment-related and other revenue components. Net investment income decreased $130 million (11%) in 2002 principally due to the lower interest rate environment that existed in 2002 as compared to 2001. Net realized gains on investments decreased $195 million (45%) in 2002 due to reduced opportunity for gains within the overall investment portfolio combined with higher levels of other-than-temporary impairment charges recognized. The decrease in total investment-related revenues is consistent with experience of the insurance industry as a whole. The $192 million (52%) decrease in other revenues in 2002 is primarily attributable to the lack of comparable non-recurring revenues generated in 2001 related to the favorable resolution of issues involving an acquisition and certain non-trade receivables.
The above-described reserving approach provides a preliminary view as to the range of indicated changes in estimates of ultimate losses and the resulting impact on recorded claim-related reserves. Considerable effort is then expended by management (including business general management and constituents from our underwriting, pricing actuaries, reserving actuaries, claims and finance teams) to fully understand the preliminary view, including changes in underlying methodologies and assumptions. This includes assessing the relative weight given to emerging claim trends resulting from recent business process changes in such areas as underwriting standards, pricing, terms and conditions and claims handling. Based on this analysis, we select a "best estimate" of remaining liability--within the range of reasonably possible loss scenarios--to record in the financial statements. In making this determination, we consider both (1) a balance sheet perspective--i.e., that the recorded reserves represent a reasonable estimate of the remaining liability for events occurring through the balance sheet date and (2) an income statement perspective--i.e., that the reported operating results reasonably reflect information obtained during the current reporting period.
Excluding the decrease in net premiums earned, the remaining revenue categories decreased $124 million, principally as a result of lower levels of investment income resulting from the general decline in interest rates in 2001 and a reduction in net realized gains on investments, somewhat offset by an increase in other revenues.
Income tax benefits partially offset the significant pre-tax operating loss generated in 2001. Such recorded tax benefits include the impact of our holding a significant portion of the overall investment portfolio in securities that are substantially exempt from U.S. taxation and the treatment as a purchase price adjustment for tax of certain amounts received from the seller as resolution of issues in a previous acquisition.
During each of the years in the three-year period ended December 31, 2002, we entered into aggregate excess-of-loss reinsurance treaties providing coverage when company-wide accident year loss ratios exceed the attachment point specified in the respective contracts. In general, the terms of these aggregate treaties require the payment of an initial premium to our reinsurers upon inception of the contract. On these contracts, we also pay additional contingent premiums when we incur losses that are subject to recovery under the treaty. Alternatively, certain contracts allow for the required additional contingent premiums to be paid to our reinsurers (plus financing charges) when we settle the related losses and loss expenses (often many years after the incurred date). Other than the referenced contingent premiums paid or accrued at the time a claim for recovery is recognized (plus financing costs, if applicable), we are not obligated to pay any additional future premiums under the terms of these aggregate treaties. The total financing charges related to our aggregate excess-of-loss program for 2003 are estimated to be approximately $120 million.
As of December 31, 2002, the fair value of the GE Frankona Re Group's investments totaled $7,093 million, an increase of $496 million from December 31, 2001. The composition of GE Frankona Re Group's investments is summarized as follows:
Impairment of investment securities results in a charge to operations when a market decline below cost is considered other than temporary. We regularly review each investment security for impairment based on criteria that include the extent to which cost exceeds market value, the duration of that market decline and the financial health of and specific prospects for the issuer. Our investment securities amounted to $26.4 billion at year-end 2002. Gross unrealized gains and losses included in that carrying amount related to debt securities were $549 million and $142 million, respectively. Gross unrealized gains and losses on equity securities were $9 million and $121 million, respectively. Of securities with unrealized losses at year-end 2002, and based on application of our accounting policy for impairment, approximately $130 million of portfolio value, including approximately $14 million from the telecommunications and cable industries, is at risk of being charged to earnings in 2003. We actively perform comprehensive market research, monitor market conditions and segment our investments by credit risk in order to minimize impairment risks. Further information is provided in notes 2 and 4 and on pages 26-28, which discusses the investment securities portfolio.