Effective January 1, 2001, in conjunction with the expansion of underwriting activities by our insurance companies and in an effort to streamline certain of our operations, we consolidated the operations of certain of our agency operations, with those of certain of our insurance companies. We have consolidated the operations of our domestic general aviation underwriting agency, HCC Aviation, and our occupational accident and workers' compensation underwriting agency, HCC Employer Services, with those of U.S. Specialty, and the operations of our London-based accident and health reinsurance underwriting agency subsidiary, LDG Re (London), with those of the London branch of Houston Casualty. These consolidations will result in a reduction in management fee income and the net earnings from our underwriting agency segment, but such reduction will be more than offset over time by increases in net earnings of our insurance company segment. The cost of this restructuring was $1.0 million (after-tax) and was recorded in the fourth quarter of 2000. A total of 26 employees were or will be terminated as a result of this consolidation. As market conditions warrant, we anticipate reviewing our other agency operations to determine if similar consolidation activities will provide greater operating efficiencies.
Premiums underwritten by our underwriting agencies increased 27% to $1.1 billion for 2000 compared to 1999. Management fees generated by our underwriting agencies increased 6% to $96.1 million in 2000 compared to 1999. These increases resulted primarily from the increased premium volume in the medical stop-loss line of business, which was due to rate increases and the Centris acquisition. The increase in management fees was disproportionate to the increase in written premium as a result of higher policy issuance fees and increased retentions by our insurance companies which reduced management fees earned by our underwriting agencies. These reductions are offset by an equal reduction in net policy acquisition costs of our insurance companies. Net earnings of our underwriting agencies increased 13% to $19.4 million in 2000 from $17.2 million in 1999 due to increased revenue, a smaller restructuring charge in 2000 than in 1999 and higher pretax margins primarily as a result of the successful integration of the Centris acquisition.
In 1999, our insurance companies recorded a $43.5 million provision for reinsurance to reflect an estimated $29.5 million pre-tax loss for the insolvency of a reinsurer and an estimated $14.0 million pre-tax loss, the majority of which represents the discount on ceded reserves related to the commutation we initiated of all liabilities with another reinsurer. The commutation was settled for cash and other assets totaling $56.5 million in February, 2000.
Statement of Financial Accounting Standards ("SFAS") No. 133 entitled "Accounting for Derivative Instruments and Hedging Activities" was issued in June 1998, and became effective for us January 1, 2001. We utilize derivatives or hedging strategies on a limited basis. The cumulative effect adjustment due to this change in accounting has been calculated by us and is not material to our financial position, results of operations or cash flows nor do we expect the adoption of SFAS No. 133 to be material on an ongoing basis due to our limited use of derivatives.