Property-Liability policies in force increased by 12.5%.
As a result, we now have almost 192 million policies in force across the enterprise.
Capital deployment results were excellent, with $1.5 billion of cash returned to shareholders in the quarter.
Revenues of $12.5 billion in the quarter increased 16.9% compared to the prior year quarter, and that reflects both the higher earned -- National General acquisition, Allstate brand, homeowners premium growth and higher net investment income.
Property-Liability premiums and policies in force increased 13.5% and 12.5%, respectively.
Net investment income was $764 million, and that's up almost about $300 million compared to the prior year quarter, reflecting strong results from the performance-based portfolio.
Net income was $508 million in the quarter, and that's compared to $1 billion in the prior quarter as lower underwriting income was partially offset by the higher investment income.
Adjusted net income was $217 million or $0.73 per diluted share, and it's decreased $683 million compared to the prior year quarter, reflecting the lower underwriting due to the higher auto and homeowners insurance loss costs.
Adjusted net income was $10.70 per share for the first nine months, and that was above the prior year as higher investment income and lower expenses [Technical Issues] more than offset higher loss costs.
And so we do it on a long-term basis, whether that's three, five or 10 years.
The recorded combined ratio of 105.3 increased 13.7 points compared to the prior year quarter.
Higher catastrophe losses shown in the middle of the chart had a negative 1.4 point impact on the combined ratio as favorable reserve reestimates recorded in 2020 from wildfire subrogation settlements positively impacted the prior year quarter.
Gross catastrophe losses were higher but were reduced by nearly $1 billion of net reinsurance recoveries following Hurricane Ida, demonstrating the benefits of our long-term approach to risk and return management of the homeowners insurance business and our comprehensive reinsurance program.
Noncatastrophe prior year reserve strengthening of $162 million in the quarter drove an adverse impact of 0.8 points primarily from increases in auto and commercial lines.
This also included $111 million of strengthening in the quarter related to asbestos, environmental and other reserves in the runoff Property-Liability segment following our annual comprehensive reserve review.
Allstate brand auto insurance underlying combined ratio finished at 97.5 for the quarter and 89.7 over the first nine months of 2021.
Allstate brand auto property damage frequency increased 16.6% compared to 2020 but decreased 16.8% relative to 2019.
The underlying combined ratio was 93.1 in 2019, which generates an attractive return on capital.
Favorable auto frequency in the third quarter of 2021 lowered the combined ratio by 6.4 points compared to 2019.
Increased auto claim severity, however, increased the combined ratio by 12 points versus two years ago, as you can see from the red bar.
The cost reductions implemented as part of Transformative Growth reduced expenses by 1.3 points, which favorably impacted 2021 results.
This year, the increase reflects the impact of supply chain disruptions in the auto markets, which has increased used car prices and enabled original equipment manufacturers to significantly increase part prices.
The chart on the lower right shows used car values began increasing above the CPI in late 2020, which accelerated in 2021, resulting in an increase of 44% since the beginning of 2019.
Increases in report year severities for auto insurance claims during the first two quarters of 2021 increased the third quarter combined ratio by 2.6 points, as you can see by the green bar on the lower left.
Those states denoted with the caret are top 10 states in terms of written premium as of year-end 2020.
In the third quarter, we've received rate approvals for increases in 12 states, primarily in September.
We adapted quickly to higher severities in the fourth quarter, with plans to file rates in an additional 20 states.
We have already implemented rate increases in eight states during the fourth quarter, with an average increase of 6.7% as of November 1.
Looking ahead, we expect to pursue price increases in an additional 12 locations by year-end.
Through innovation and strong execution, we achieved 2.6 points of improvement when comparing 2020 to 2018, with further improvement occurring through the first nine months of 2021.
Over time, we expect to drive an additional three points of improvement from current levels, achieving an adjusted expense ratio of approximately 23 by year-end 2024.
As you can see in the chart on the left side of the slide, Property-Liability policies in force grew by 12.5% compared to the prior year quarter.
National General, which includes Encompass, contributed growth of four million policies, and Allstate brand Property-Liability policies increased by 231,000 driven by growth across personal lines.
Allstate brand auto policies in force increased slightly compared to the prior year quarter and sequentially for the third consecutive quarter, including growth of 142,000 policies compared to prior year-end, as you can see by the table on the lower left.
[Technical Issues] 38% increase in the direct channel more than offset a slight decline from existing agents and volume that would have normally been generated by newly appointed agents.
The addition of National General also added 502,000 new auto applications in the quarter.
Revenues, excluding the impact of realized gains and losses, increased 23.3% to $597 million in the third quarter.
Protection Plans and net written premium increased by $139 million due to the launch of the Home Depot relationship focusing on appliances.
Our quarterly net written premium is now 5.5 times the level of when the company was acquired in 2017.
Policies in force increased 12.5% to 150 million driven by growth in Allstate Protection Plans and Allstate Identity Protection.
Adjusted net income was $45 million in the third quarter, representing an increase of $5 million compared to the prior year quarter driven by higher profitability at Allstate Identity Protection and Arity.
Net investment income totaled $764 million in the quarter, which was $300 million above the prior year quarter, driven by higher performance-based income, as shown in the chart on the left.
Performance-based income totaled $437 million in the quarter, as shown in gray, reflecting increases in private equity investments.
These results represent a long-term and broad approach to growth investing, with nearly 90% of year-to-date performance-based income coming from assets with inception years of 2018 and prior.
Market-based income, shown in blue, was $6 million below the prior year quarter.
Our total portfolio return was 1% in the third quarter and 3.3% year-to-date, reflecting income and changes in equity valuations, partially offset by higher interest rates.
Significant cash returns to shareholders, including $1.5 billion through a combination of share repurchases and common stock dividends, occurred during the third quarter.
Common shares outstanding have been reduced by 5% over the last 12 months.
Already in the fourth quarter, we successfully completed the acquisition of SafeAuto on October one for $262 million to leverage National General's integration capabilities and further increased personal lines market share.
These divestitures free up approximately $1.7 billion of deployable capital, which was factored into the $5 billion share repurchase program currently being executed.
As an example, Allstate is in the top 15% of S&P 500 companies and cash returns to shareholders by providing an attractive dividend and repurchasing 25% and 50% of outstanding shares over the last five and 10 years, respectively.

Summary:
Property-Liability policies in force increased by 12.5%.
Revenues of $12.5 billion in the quarter increased 16.9% compared to the prior year quarter, and that reflects both the higher earned -- National General acquisition, Allstate brand, homeowners premium growth and higher net investment income.
Property-Liability premiums and policies in force increased 13.5% and 12.5%, respectively.
Adjusted net income was $217 million or $0.73 per diluted share, and it's decreased $683 million compared to the prior year quarter, reflecting the lower underwriting due to the higher auto and homeowners insurance loss costs.
This year, the increase reflects the impact of supply chain disruptions in the auto markets, which has increased used car prices and enabled original equipment manufacturers to significantly increase part prices.
As you can see in the chart on the left side of the slide, Property-Liability policies in force grew by 12.5% compared to the prior year quarter.
Policies in force increased 12.5% to 150 million driven by growth in Allstate Protection Plans and Allstate Identity Protection.