We are very pleased to report outstanding second quarter results, highlighted by strong growth with net written premium increases of 11.7% or 8.6% on an adjusted basis, excluding the impact of 2020 premium returns, driven by gains across all segments.
Operating income of $104 million or $2.85 per share, operating return on equity of 14.7% and a combined ratio of 94.4%.
In Personal Lines, we delivered growth of 11.6% in the quarter or 5% excluding the effect of premium returns in the prior year period.
We grew our Commercial Lines business by 11.7%, driven by the strong performance of our specialty portfolio as well as our small commercial business, which benefited from the economic recovery and is beginning to see the impact of the rollout of our new quote-and-issue platform, TAP sales.
Our efforts to selectively apply rate adjustments where warranted have been very successful, as demonstrated by our sequential PIF growth of 1.8% in auto and 1.7% in home during the quarter.
Account business represents over 85% of our overall book, leading to a high level of retention and business stability.
We executed extremely well on our strategic priorities, posting growth of 12% in Specialty and 11% in Core Commercial, driven by a pickup in new business, rate increases and exposure growth.
In the second quarter, we launched this new platform in an additional nine states, bringing the total to 20 states, and we complete the implementation countrywide for our first product business owners advantage by year-end.
The efficiency gains are substantial, enabling the quoting and an issuance of a single location risk in 50% of the time it required before.
We achieved rate increases of 6.5% in Core Commercial and sustained strong retention at 84.9%.
We achieved rate increases of 8.5% in Specialty, up from 7.5% in the first quarter.
For the second quarter, we reported net income of $128.5 million or $3.52 per diluted share compared with net income of $115.2 million or $3.01 per diluted share in the second quarter of 2020.
After-tax operating income was $104 million or $2.85 per share compared with $62.7 million or $1.63 per share in the prior year quarter.
Book value per share increased 4.8% in the quarter driven by earnings and to a lesser extent, an increase in unrealized gains in our fixed income portfolio.
We are pleased with our overall combined ratio of 94.4% in the second quarter of 2021 compared to 96.2% in the prior year quarter, which, a year ago, reflected several large catastrophe events, including losses from social unrest.
In the second quarter 2021, we incurred catastrophe losses of $76.8 million or 6.5% of net earned premium, 40 basis points above our quarterly expectation, primarily reflecting severe wind, torrential rain and hail events throughout the Midwest in June on the heels of a very light April and May.
Prior year reserve development, excluding catastrophes, was favorable in the quarter, adding $12.6 million to the bottom line, primarily reflecting continued favorability in workers' compensation, Personal Auto and several Specialty lines.
Our expense ratio for the second quarter of 2021 was 31.2%.
We are confident that we can deliver a 30 basis point expense ratio improvement for full year 2021.
Overall, current accident year combined ratio ex-CAT was 89% in the quarter.
Our Commercial Lines combined ratio, excluding catastrophes, was 89.5%, up 2.7 points from the second quarter of last year, primarily reflecting a comparison to an extraordinarily low level of losses in the second quarter of last year.
Our CMP current accident year loss ratio, excluding catastrophes, was 57.6%, in line with most recent trends but slightly elevated compared to our expectations, driven by a higher incidence of property large losses.
In other Commercial Lines, the current accident year loss ratio, excluding catastrophes, was 55.3%.
Current accident year loss ratio was 61.5%, which was generally in line with recent historical results.
Commercial Lines net written premiums grew exceptionally well at 11.7% in the second quarter, powered by our small commercial and Specialty businesses.
We achieved strong operating metrics, including improved rate, meaningful increases in exposures, return to strong new business growth and a solid core commercial retention of 84.9%.
Our combined ratio, excluding catastrophes, was quite low at 85.3%, but up from 76.8% in the same period last year reflecting the benefit of COVID-19 related auto claims frequency declines.
Our Personal Lines auto current accident year loss ratio, excluding catastrophes, was 62.2% below historical trends, but up slightly from 60% in the first quarter.
Personal Lines net written premiums grew 11.6% in the quarter or 5% adjusted for last year's premium returns.
Our net investment income was $75.6 million for the quarter, up $17.9 million or 31% from the prior year period.
Net investment income in the second quarter of 2020 was adversely affected by a $4.6 million loss on limited partnerships, while partnership income in the second quarter of 2021 was $16 million, exceeding our expectations by $9 million.
Cash and invested assets at the end of the second quarter were $9.1 billion, with fixed income securities and cash representing 85% of the total.
Our fixed maturity investment portfolio has a duration of five years and is 96% investment grade.
Net unrealized gains on the fixed maturity portfolio at the end of the second quarter 2021 were $357.8 million before taxes.
Our book value per share of $88.23 reflects an increase of 4.8% in the quarter.
Through July 26, 2021, we repurchased approximately $10 million of stock, leaving about $395 million of capacity under our stock repurchase authorization that the Board expanded in May.
In addition, during the quarter, we paid a regular cash dividend of approximately $25 million.
With two quarters of better-than-expected ex-CAT combined ratio performance, we are improving our full year 2021 ex-CAT combined ratio outlook from 90% to 91% to 89% to 90%.
As noted earlier, we remain on track to reduce our expense ratio by at least 30 basis points in 2021 to 31.3% and we expect our third quarter cat load to be 5.2%.

Summary:
Operating income of $104 million or $2.85 per share, operating return on equity of 14.7% and a combined ratio of 94.4%.
For the second quarter, we reported net income of $128.5 million or $3.52 per diluted share compared with net income of $115.2 million or $3.01 per diluted share in the second quarter of 2020.
After-tax operating income was $104 million or $2.85 per share compared with $62.7 million or $1.63 per share in the prior year quarter.
We are pleased with our overall combined ratio of 94.4% in the second quarter of 2021 compared to 96.2% in the prior year quarter, which, a year ago, reflected several large catastrophe events, including losses from social unrest.