We posted net written premium growth of 8.4% and a combined ratio excluding catastrophes in line with our original expectations for this quarter.
Year-to-date through September, our growth rate of 8.4% was equally robust, driven by successful execution of our differentiated business strategy and disciplined capital allocation.
As I noted during our Investor Day, in my more than 3.5 decades in this business, industry trends have never been as dynamic as they are today.
At $153.5 million, our third quarter losses were in line with the preliminary estimate we shared with you in our September 22, pre-release.
Hurricane Ida represented approximately $75 million of the total with the balance comprised of rain, flood and tornado events.
I will now turn to a review of our business, beginning with Personal Lines, which generated net written premium growth of 8% in the quarter.
At 88.7%, our retention places us in the top quartile in the industry, supported by our account strategy and focus on being a market leader for customers with sophisticated insurance needs.
This solution has found a sweet spot between commodity players and high net worth carriers for customers in the $750,000 to $3 million homeowners coverage range with broader and more complex insurance needs, providing us a substantial competitive advantage and future growth opportunities.
Strong growth of 8.7% in the quarter was driven by positive exposure activity, rate increases, strong renewals in core Commercial Lines and continued momentum in specialty.
We achieved core commercial rate increases of 6.9% in the third quarter consistent with the second quarter dynamics.
We added 10 more states over the last three months, bringing the total number to 30, now covering the vast majority of our existing small commercial footprint.
Specialty continues to be a strong source of revenue expansion with underlying growth holding at near double digits for our most profitable businesses and continuing robust rate of 8% in the quarter.
We conducted over 40 executive meetings both in-person and virtually talking with many of the top 100 agents around the country.
In the third quarter we reported net income of $34 million or $0.94 per fully diluted share compared with net income of $118.9 million or $3.13 per fully diluted share in the same period last year.
After-tax operating income was $30.8 million or $0.85 per diluted share compared with $93.5 million or $2.46 per diluted share in the prior year third quarter.
We recorded an all-in combined ratio of 102.3% which included catastrophe losses from Hurricane Ida.
Third quarter catastrophe losses of $153.5 million before taxes which represented 12.9% of net earned premiums were at the lower end of the guidance we provided in our prerelease on September 22.
Ida added $75 million in losses to an already active cat season within our geographic footprint.
Our ex-CAT combined ratio is 89.4%, reflecting the strong underlying performance of our diversified business.
Turning to our reserves, we reported net favorable development of $20.9 million in the third quarter 2021, primarily due to continued favorability in Personal Auto and workers' compensation, in addition to some favorability in other commercial lines.
Personal Auto favorability of $10 million includes the benefit from revised fee schedules and loss control measures that came into effect in Michigan on July 1st, 2021, as part of the PIP insurance reform there.
Looking at expenses, our expense ratio improved 0.7 points from the prior year third quarter to 31.1%, largely as expected.
Our expense ratio year-to-date stands at 31.3%, a 20 basis point improvement from the first nine months of 2020.
And we are confident in our ability to deliver on a 30 basis point improvement for the full year.
We delivered a combined ratio excluding catastrophes of 87.7%, better than our original quarterly expectations driven by favorable development.
Our Personal Auto current accident year loss ratio was 68.9%, which is consistent with our plan and was contemplated in our guidance.
However, it rose 8.8 points relative to the third quarter of 2020, and was up 6.7 points sequentially.
And the current Personal Lines rate of 2.1% in the third quarter is the low watermark in our rate trajectory.
Homeowners current accident year loss ratio excluding cats was 51.9%, up 3.7 points from the prior year period, which was reduced last year during COVID.
Our homeowners rate including exposure is approximately 6% in the third quarter and it is moving to approximately 8% starting in 2022.
Premium growth of 8% in personal lines was driven by robust new business activity and increased retention.
Turning to Commercial Lines, we reported a combined ratio excluding catastrophes of 90.5%, a decrease of 1.3 points from the prior year period helped by an improved expense ratio from growth and higher favorable development.
Our CMP current accident year loss ratio ex-CAT was 64.2%, an increase from the third quarter of last year and above our expectations.
In Commercial Auto, the ex-cat loss ratio was generally in line with the third quarter of 2020 at 65%.
Our workers' comp ex-cat loss ratio improved 4.2 points to 57%, primarily due to positive audit premium adjustments for prior period policies.
In other Commercial Lines, the ex-cat loss ratio improved 2.4 points from Q3 2020 to 51.7%, which was also better than our expectations driven entirely by Marine and HSI, which both experienced lower than expected losses in the quarter.
Our Commercial Lines segment generated premium growth of 8.7% in the quarter with solid contributions from both core and specialty.
Professional lines, as well as excess and surplus fueled the growth momentum in Specialty, which overall achieved rate increases of 8% in the quarter.
Q3 was a strong quarter from an investment income perspective, as we delivered net investment income of $78.8 million up nearly 17% from the prior year quarter, on higher investment partnership income.
Partnership income continued to contribute significantly to our investment income, adding approximately $19 million to our pre-tax income instead of an expected $7 million based on the strong equity returns and some meaningful underlying investment monetization.
Fixed maturities earned yields, continue to slowly drift lower, now standing at 2.96%, due to lower new money yields.
Cash and invested assets were $9.3 billion at the end of the third quarter, with fixed income securities and cash representing 85% of the total.
Our fixed maturity investment portfolio has duration of five years and is 96% investment grade.
Turning now to our equity and capital position, our book value per share of 87.04 reflects a decline of 1.3% from the second quarter, due to the impact of rising interest rates on our fixed income portfolio and quarterly dividends.
For the third quarter and through October 27, we repurchased approximately $34 million of stock, slowing down the pace of repurchases a bit during the cat season.
In addition we paid a regular cash dividend of approximately $25 million during the quarter.
Reflecting the higher catastrophe losses during the quarter, our return on equity was 4.3% well below our historical trends and our long-term target.
Our annualized year-to-date ROE was 9.3%.
Additionally, with three quarters of the year now in the books, we believe that we will end the year at the bottom of our 89% to 90%, ex-CAT combined ratio guidance.
We're also on target to reduce our expense ratio by at least 30 basis points, in 2021 to 31.3%.
And we expect our fourth quarter cat load to be 3.9%.

Summary:
In the third quarter we reported net income of $34 million or $0.94 per fully diluted share compared with net income of $118.9 million or $3.13 per fully diluted share in the same period last year.
After-tax operating income was $30.8 million or $0.85 per diluted share compared with $93.5 million or $2.46 per diluted share in the prior year third quarter.
We recorded an all-in combined ratio of 102.3% which included catastrophe losses from Hurricane Ida.
Q3 was a strong quarter from an investment income perspective, as we delivered net investment income of $78.8 million up nearly 17% from the prior year quarter, on higher investment partnership income.